SCOR, Converium reach friendly takeover deal

PARIS—SCOR S.A. moved a step closer to buying its Swiss rival Converium Holding Ltd. last week when a friendly takeover deal was reached after months of wrangling.

SCOR and Converium announced May 10--just hours before Converium's annual general meeting--that Paris-based SCOR had increased its offer for Zug, Switzerland-based Converium.

SCOR said it would pay half a new SCOR share and 5.50 Swiss francs ($4.53) per Converium share for the company--a 7.9% increase on its original offer, which bid 4 Swiss francs ($3.30) per share.

Previously, its unsolicited offer valued Converium at about $2.56 billion--a valuation Converium's board considered too low. The new bid values Converium at about $2.76 billion.

As part of the new deal, which Converium's board recommended shareholders accept, SCOR said it would not terminate Converium employees in Switzerland, except where there is "just cause."

The French reinsurer also pledged to retain a strong presence in Zurich--where Converium has major operations--and to make it one of three main European hubs, together with Paris and Cologne, Germany.

For its part, Converium said it would withdraw litigation filed against SCOR in the United States.

That complaint accused SCOR and a major shareholder of excluding Converium's U.S. shareholders from participating in SCOR's original bid offer (BI, April 23).

Although Converium's board sought to reassure Converium shareholders of the rationale behind a tie-up with SCOR, some attendees at the Swiss reinsurer's annual meeting spoke out against the proposed deal.

Rating agencies did not immediately change their ratings on either company in the wake of the announcement.

New York-based Standard & Poor's Corp. said its A- rating of Converium remained unaffected by the board's recommendation of SCOR's offer.

"The endorsement of the Converium board and stated commitment of the global executive committee to retain Converium talent and its clients lessens the potential for Converium's franchise value to be eroded should SCOR's revised bid be successful," S&P said in a statement.

Moody's Investors Service in New York said that the deal should strengthen SCOR.

"Moody's believes that an acquisition of Converium makes strategic sense for SCOR and would enhance its market position, with the combination of the two businesses resulting in a leading global reinsurer with a particularly strong position in Europe," it said in a statement.

Michael Zboron, managing senior financial analyst at A.M. Best Europe in London, a unit of Oldwick, N.J.-based A.M. Best Co. Inc., said that while a merger of SCOR and Converium would reduce the number of reinsurers, it would create a larger entity that could have more influence on pricing going forward.