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Scor's Converium Bid Hopes Boosted by Profit Surge

Reuters
Wednesday, 4 Apr 2007 | 9:02 AM ET

French reinsurer Scor reported a surge in net profits on Wednesday that beat market forecasts, boosting the chances of success in its $2.5 billion (1.87 billion euro) share-and-cash bid for rival Converium.

Scor said its underlying net profit last year rose 92% to 252 million euros ($337 million) before adding back 54 million euros of "badwill" linked to its buy of German reinsurer Revios last year, as Revios turned out to be worth more than the agreed acquisition price.

Eleven analysts polled by Reuters had on average forecast a net profit of 205.4 million euros.

Scor has bought a 32.9% stake in Converium and made an offer to acquire control of the company. Its bid values the whole of Converium at around 3.1 billion Swiss francs ($2.5 billion).

Scor is offering 0.5 Scor share and 4 Swiss francs per share in Converium. But Converium has rejected the bid and said it is looking for a rival to make a counterbid.

Converium's shares have traded above Scor's offer price but analysts said Scor's profit numbers would strengthen its case.

"Apparently the market is now factoring in a smaller chance that there will be a higher bid or that Converium will find a white knight," said Julius Baer analyst Cyril Voser.

Edmond de Rothschild Asset Management fund manager Stephane Chossat also agreed that Scor was in a strong position.

"The chance of Scor succeeding in its Converium bid is increasing," said Chossat, whose portfolio includes Scor shares.

Scor Shares Rise

Scor shares were up 2.1% at 21.45 euros in early afternoon trade. Converium shares were up 1.4% at 21.70 euros.

Based on those prices, Scor's offer values Converium at around 21.5 Swiss francs per Converium share.

The French group unveiled a presentation entitled "Dynamic Lift," showing how it expected an enlarged Scor/Converium group to develop from 2007-2010.

It expects an acquisition of Converium to lead to double-digit earnings per share growth and that the enlarged company will have an A+ credit rating by 2010 and an annual dividend payout ratio of 35% of earnings.

"The combination of Scor and Converium rests on the conviction that such a project represents a unique strategic opportunity to create the fifth-largest, multi-line reinsurer in the world," Scor's chairman and chief executive, Denis Kessler, said in a statement.

Kessler also told analysts at a presentation in Paris that he thought Scor's current offer was "fair."

Scor proposed a dividend of 0.8 euros a share, up more than 30% from last year.

Scor said it would delist from the New York Stock Exchange and seek a secondary listing on the Swiss Exchange.

Based on latest prices, Scor shares have fallen around 4% since the start of 2007, underperforming a 2% rise in the DJ Stoxx European insurance sector.

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