SCOR shares have risen 19% since French insurance group Covéa first revealed its interest in acquiring the reinsurer, and are now approaching the €43 share price offered by Covéa’s initial €8.2 billion (US $9.6 billion) bid, according to J.P. Morgan.
Analysts at the firm believe this continued strong price action indicates that many market participants are anticipating a deal between either SCOR and Covéa, or between SCOR and another party.
Although J.P. Morgan rules out neither scenario, it also believes SCOR’s statements so far make a friendly transaction with Covéa unlikely.
SCOR said it rejected the bid from Covéa on the grounds that a merger deal was “fundamentally incompatible with SCOR’s strategy of independence” and would “jeopardize the Group’s strong value-creating strategy.”
Thus, while Covéa could likely fund a deal that valued shares in excess of €50 per share, it is difficult to see how an arrangement could be reached given that SCOR’s objections have not centred on price.
This could leave the rumoured merger deal with PartnerRe on the table, which the two companies have denied interest in, but which Berenberg recently suggested would make strategic sense for both parties.
Nevertheless, J.P. Morgan said there remains a strong possibility that SCOR succeeds in maintaining independence and has accordingly downgraded its investment outlook to Neutral, as it believes the current €42 share price may fade if an M&A deal becomes less likely.
SCOR’s management has come under fire from activist investors for refusing to engage in further negotiations with Covéa following their rejection of the acquisition bid.
Catherine Berjal, President of French investment fund CIAM, said that this decision represents “gross management negligence” and has threatened to hold CEO Denis Kessler and the Board of Directors legally liable.
SCOR has since reaffirmed its rejection of any acquisition offer and has requested that Covéa’s CEO, Thierry Derez, permanently resign from SCOR’s Board of Management.
In a second letter, Berjal also addressed reports that SCOR’s management had unanimously committed to resign in the event of a successful acquisition bid, and accused the Board of using renumeration payment as an ‘anti-takeover policy’ to avoid further consideration of a deal.
Kessler has dismissed Berjal’s claims as “baseless, false and misleading,” while SCOR has expressed its commitment to continue creating value for its long-term shareholders following the rejected deal.
