Converium enters French hands

Scor has a controlling stake in Converium Keystone

French reinsurer Scor has acquired an 86.07 per cent ownership stake in Swiss rival Converium following an initial share tender period that expired on Monday.

Converium is the latest in a string of Swiss companies to fall into foreign hands.

Scor snapped up more than half of its shares at SFr22.80 ($18.80) each after having an improved takeover offer accepted in May. Scor will extend its offer for the remaining shares between July 13-26.

Scor upped its takeover offer to half a new Scor share for every Converium share plus SFr5.50 in cash from an initial hostile bid of SFr4, valuing the company at SFr3.4 billion. It now has 53.13 per cent of Converium’s shares, equating to over 86 per cent of total share capital.

Converium’s acceptance at its annual general meeting on May 10 ended a three-month battle for control of the reinsurer that began with Scor unexpectedly taking a 32.9 per cent stake in February, including the 20 per cent stake held by Swiss financier Martin Ebner.

The Swiss authorities are still investigating whether Converium and Ebner should be considered as acting together on the bid, a charge both parties deny.

Converium knocked back the initial offer with the warning that it would entail the loss of premiums worth SFr800 million, before changing tack when the bid was improved.

“All the conditions are now in place to work without delay to create together a top-five global multi-line company with European roots and global reach,” Scor boss Denis Kessler said when the offer was accepted.

Beale to go

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

“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,” Kessler said in May.

But Converium chief executive Inga Beale, along with head of finance Paolo de Martin, will leave the company and the board of directors is expected to resign. Beale and de Martin will receive pay-offs reported to be SFr4.2 million for Beale and SFr2.5 million for de Martin.

Beale was appointed only in February last year but she has been credited with playing a major part in turning around the fortunes of the company after it hit a rocky patch in 2004.

swissinfo with agencies

In brief

Converium is the latest in a string of Swiss companies to fall into foreign hands.

French insurer AXA bought up the Winterthur insurance company from Credit Suisse for SFr12.3 billion last year.

German national airline Lufthansa completed the takeover of Swiss on July 1.

Austrian group Victory Holding bought up technology company Unaxis two years ago, now named Oerlikon, and then brought machinery manufacturers Saurer into the fold last September. In January they also raised their stake to 20.1 per cent in Swiss telecommunications firm Ascom.

Russian billionaire Viktor Vekselberg has also secured a stake in Oerlikon with his company Renova. Both groups have made public their intention to buy up more Swiss firms.

Takeover rules in Switzerland were changed at the beginning of July to make it harder for bidding firms to undertake ambush takeovers by amassing large amounts of shares in the target company by stealth.

Converium’s hard times

In 2004 Converium – the former reinsurance business of Zurich Financial Services – was hit by 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 (SFr83.4 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.

The rating agency Standard & Poor’s raised Converium’s long-term financial rating to “A-” on March 1. This was seen as a key to capture further growth opportunities.

Converium employs about 500 people in 15 offices worldwide and is organised into three business segments: Standard Property and Casualty Reinsurance, Specialty Lines, and Life and Health Reinsurance.