John Elkann/Exor: shrewd steward breaks from cover
Holding company of Italian industrial dynasty confirms sale of PartnerRe for $9bn
The good timing that took the Agnelli family into car production in 1899 has stayed with them. They are getting out of insurance as falling rates hurt the sector’s prospects. Exor, the holding company of the Italian industrial dynasty, confirmed the sale of PartnerRe for $9bn on Wednesday.
Exor bought the Bermuda-based reinsurer at a valuation of $6.9bn in 2016. The disposal, to French mutual insurer Covea, will net a tidy return. No surprise there. Covea’s bosses were eager buyers, on the rebound from a fumbled attempt to buy rival Scor. John Elkann, the boss of Exor, is a shrewd operator.
Gianni Agnelli, in his day the quintessential Italian tycoon, chose his grandson as his successor. That bequest could have been a poisoned chalice. But Mr Elkann has balanced family legacy with a modernising instinct. Exor has produced ten-fold returns during his decade at the helm.
This has reflected the protracted turnround of Fiat Chrysler Automotive by Sergio Marchionne, who died in 2018. Last year, Mr Elkan orchestrated a merger agreement between FCA and Peugeot, bringing much-needed consolidation in a weakening industry.
Once PartnerRe is disposed of, Exor’s key remaining assets will be a one-third stake in FCA and a similar holding in sports car maker Ferrari. Exor’s mix of assets remain eclectic. They include Juventus football club, alongside holdings in The Economist and the business that owns newspapers La Repubblica and La Stampa.
This diversity gives some investors the jitters. Like conglomerates, holding companies usually trade below the value of underlying assets. Exor’s discount was a quarter of its net asset value in November. Lex calculates that has widened to about 35 per cent.
The influx of cash from the PartnerRe sale should help narrow that gap. The challenge for Mr Elkann is to win a better rating once proceeds have been reinvested or spent on a special dividend.
Investors should remember a simple rule when buying the shares of a dynastic business: you are hitching a lift in the family limo, not hailing a taxi whose destination you can dictate. Mr Elkann deserves credit for the stylishness of his driving. He is worth backing.