The management of Swiss-based reinsurer Converium issued a bulletin urging its shareholders to reject the offer by France’s SCOR Group, which has already acquired a 32.9 percent stake in Converium (See IJ web site Feb. 19, March 21 and April 6).
Converium’s management has never been in favor of the deal, and in the present bulletin said SCOR’s “hostile approach could result in loss of business of up to $800 million.”
Converium’s Board of Directors reiterated their position that SCOR’s offer “fundamentally undervalues the Company’s franchise and growth prospects.” The Board also expressed concerns about “significant business, integration and execution risks arising from the hostility of SCOR’s offer,” adding that the unsolicited bid “threatens to destroy value for Converium’s stakeholders and to undermine the stability of SCOR’s shares, the bulk of its acquisition currency.”
Board Chairman Markus Dennler commented: “After careful consideration of SCOR’s offer, we urge our shareholders to place their confidence in our management’s detailed and credible plan for sustainable future value creation. Our standalone forecasts for shareholder returns outstrip SCOR’s for the combined business, reflecting our operational strength and potential for profitable growth in the wake of our recent rating upgrade from Standard & Poor’s.
“SCOR wants to deliver that potential to its own shareholders, offering in exchange a volatile share currency which could see further devaluation from the risks inherent in the transaction. To put it simply, our shareholders stand to score more by sticking with Converium.”
Converium also summarized the main reasons for the Board’s recommendation, noting that they were to be published in several Swiss newspapers after the close of share trading on Friday, April 13.
The full text may be obtained on the Company’s web site at: www.converium.com.
The main points – in headline form – were listed as follows:
— The offer undervalues Converium
— Hostile offer carries significant business, integration and execution risks
— SCOR’s shares weak acquisition currency
— Prospects of a combined entity are questionable
In its “concluding recommendation the Board reiterated that it is urging the Converium’s shareholders “to reject SCOR’s offer and place their faith in future value creation from a team which has proven its ability to drive the business forward. It is a choice, which favors certainty over considerable business, execution and integration risks and preserves value rather than throwing it away. Those who want to score more should allow Converium’s management team to pursue its plan for value creation to its exciting conclusion.”
The Company also announced that it “will release its first quarter 2007 financial results before the markets open in Europe on Thursday, April 19, 2007. The release date has been brought forward from May 8, 2007.”
A web cast for the investment community and media will be held on the same day at 9.30 a.m. Central European Time (CET). It can be accessed via the web site and will be archived as of “about noon time that day. The telephone replay of the conference call will also be available one hour after the call for 24 hours by dialing +41 91 612 4330 (Europe), +1 (1) 866 416 2558 (USA) or +44 (0) 207 108 6233 (UK) with access code: 336#.
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