Converium accepts French takeover bid

This time the price is right for Converium's board of directors Keystone

Swiss reinsurer Converium has dropped its opposition to a takeover by French rival Scor following a significantly improved offer.

This content was published on May 10, 2007 - 08:52

Converium has advised its shareholders to accept the SFr23.20 ($19.06) per share bid, after spurning earlier approaches from Scor claiming that any sale would entail "considerable risk".

"Converium's board of directors unanimously welcomes today's revised offer from Scor," a company statement said. "The board therefore recommends that shareholders accept the improved offer."

Scor has improved its takeover offer to 0.5 new Scor share for every Converium share plus SFr5.50 in cash.

As part of its revised bid, Scor has promised to keep all Converium's staff for at least a year, with Zurich remaining an important centre alongside its headquarters in Paris and key operating facility in Cologne, Germany.

Converium CEO Inga Beale as well as head of finance Paolo de Martin will leave the company, and the board of directors is expected to resign.

Previously the offer was 0.5 new Scor shares plus SFr4 in cash. Based on the closing price of the French company's shares on Euronext Paris on Wednesday, the offer price values each Converium share at SFr23.20, the Swiss reinsurer said.

"Significant improvement"

"The increase in the offer price represents a significant improvement in the consideration offered to our shareholders," said Markus Dennler, chairman of the Converium board.

"The offer price recognises our remarkable turnaround of the past two years. It further reflects the exceptional quality of our staff, long-standing client relationships and excellent growth prospects supported by a strong capital position."

Scor boss Denis Kessler told shareholders at Converium's annual general meeting in Zurich on Thursday that the recommendation of the offer was "a great day".

"All the conditions are now in place to work without delay in order to create together a top five global multi-line company with European roots and global reach," he said.

"This combination project is based on solid industrial foundations. The combined group will offer a reinforced level of security for all clients.

"This combination will create career opportunities for the employees who actively participate in this project."

Previous rejection

Scor, France's largest reinsurer, said in February that it had bought 32.9 per cent of the Swiss company's shares and indicated it would launch a public tender offer at a later date.

Converium rejected the move at the time and last month recommended that its shareholders turn down what the board of directors considered to be a hostile bid.

At the time, the company said that Scor's approach was "unprecedented in the reinsurance arena" and that a takeover could entail the loss of premiums worth $800 million (SFr975 million).

It had also warned that the French offer carried what it deemed to be significant integration risks, threatening to trigger an exodus of employees.

Reinsurance companies sell backup coverage to other insurers, spreading risk so the system can handle huge losses from major disasters.

swissinfo with agencies


In 2004, Converium - the former reinsurance business of Zurich Financial Services - suffered problems at its United States subsidiary and had to raise capital to plug a hole in its reserves and stay afloat.

The company made a net profit of $68.7 million in 2005 after a loss of $582.5 million the previous year. Net profit in 2006 dropped to $57.1 million after it was hit by a heavy charge for the sale of its US business.

Converium said last month that its net profit for the first quarter had trebled because of the release of tax allowances. The company earned $150.9 million, compared with $50 million in the first quarter of 2006.

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