Highfields Capital Comments on Exchange of IRP Shares with SCOR

Boston-based Highfields Capital Management has issued a statement addressing what it termed “certain incorrect and incomplete information” being disseminated about the potential acquisition by French reinsurer SCOR of Highfields’ 46.6 percent ownership of IRP Holdings Ltd., “an Irish company formed in 2001 for the purpose of reinsuring part of SCOR’s worldwide non-life insurance business.”

The bulletin stressed that “contrary to public reports, SCOR will not be acquiring complete ownership of IRP on May 31, 2005, as a result of SCOR’s failure to satisfy the procedures, and to provide the financial information, required by the IRP Shareholders Agreement dated December 28, 2001 (the ‘Agreement’), and which are preconditions to such purchase.”

More precisely, Highfields said “SCOR has failed to fulfill its obligation to provide audited financial information for the period ended September 30, 2004, to furnish a required third-party calculation of relevant ratios and exchange consideration information, and to take other steps necessary to be in a position to complete a share exchange by the required date of May 31, 2005. As of today, SCOR has not satisfied the requirements stipulated by the Agreement, and Highfields is not able to predict when or whether SCOR will be in a position to do so and thus be in a position to acquire Highfields’ shares of IRP.”

The bulletin also added that “contrary to public reports, Highfields is not engaged in negotiations with SCOR regarding any agreement under which Highfields would waive any of its rights or claims in exchange for accepting SCOR shares in payment for Highfields’ IRP interests. Highfields intends to utilize all of its rights under the Agreement, including its right under certain circumstances to defer SCOR’s acquisition of Highfields’ IRP shares for one year, until May 31, 2006.”

Highfields added, however, that although SCOR has not fulfilled the Agreement’s exchange procedure requirements, it has been informed of “preliminary and unofficial indications” that it will have the right to defer the exchange, and that the share exchange ratio will be established by reference to the market price of SCOR shares. It also indicated that as yet it “does not have the required notices or information to evaluate or verify such conclusion, and believes there may be significant unresolved questions regarding certain balance sheet items in SCOR’s U.S. GAAP accounts.” Highfields said it has therefore “reserved its rights to review and may dispute such calculations, including calculations of the cash alternative price available to SCOR. However, taking into account the possibility that the number of SCOR shares to be offered to Highfields ultimately will be established by reference to the market price of SCOR shares, and in order to assure the integrity of the exchange ratio calculation, Highfields will request that market regulatory authorities closely monitor trading in SCOR shares in the period leading up to the possible exchange and scrutinize any transactions that appear to affect the exchange ratio calculation.”

Finally, Highfields warned that, “whether or not the sale of Highfields’ IRP shares to SCOR is completed in 2005, Highfields intends to vigorously pursue its claims against SCOR in the United States District Court for Massachusetts. In such action, Highfields alleges that SCOR fraudulently induced Highfields to invest in and fund IRP through omissions and misrepresentations about SCOR’s financial condition leading up to Highfields’ December 28, 2001 investment in IRP. ”

SCOR has not yet commented on the statement.