NEW YORK (CNNfn) -- American Re Corp. on Wednesday agreed to be bought by Germany's Munich Reinsurance Co., the world's largest reinsurance company, for $3.3 billion or $65 per share in cash.
The announcement ended weeks of speculation that investment firm Kohlberg Kravis Roberts & Co. would sell the company. Earlier reports indicated that Munich Reinsurance and a unit of General Electric Co. had both approached KKR, which owns 64.1 percent of American Re worth roughly $1.6 billion, about the takeover.
"Given the rapid consolidation of the international insurance community, this transaction will allow American Re to continue as an industry leader, enhancing its ability to provide clients with both service and capacity," said Saul Fox, a general partner at KKR. "It is the right move at the right time for both companies."
KKR bought its stake in American Re in 1992 for $1.4 billion.
Reinsurance companies, which sell insurance to insurance companies, are increasingly looking to form alliances as a way of expanding shrinking profit margins. Prior to American Re's announcement, industry leader General Re Corp. boosted its market hold with the $940 million acquisition of National Re Corp.
General Re's expansion moves put pressure on American Re, the third largest U.S. reinsurance company, to form an alliance or merger that would help it compete.
Under the agreement, American Re will become part of a Munich Re subsidiary but will maintain its headquarters in Princeton, N.J. Key managers, including Chairman and Chief Executive Paul H. Inderbitzin, will continue in their current positions.
"Munich Re's global stature and integrity are well known and I believe the strengths of the two companies will complement each other very well," Inderbitzen said.