(Adds comments from meeting, background)
By Douwe Miedema
ZURICH, May 10 (Reuters) - France’s Scor (SCOR.PA) won Swiss rival Converium CHRN.S on Thursday after raising its takeover bid to 3.4 billion Swiss francs ($2.8 billion) in a move to create the world’s fifth-largest reinsurer.
Converium, after a round of late-night talks, advised its owners to accept the increased cash-and-share offer, avoiding a showdown with Scor — which already holds 32.9 percent of Converium — at a shareholder meeting in Zurich.
“We entered into talks with Scor last weekend, and after intense discussions, we have been able to negotiate a clear improvement over the previous offer,” Markus Dennler, Converium’s chairman, told the meeting. Converium becomes the second Swiss insurer to fall prey to a French predator after AXA (AXAF.PA) bought Winterthur from Credit Suisse CSGN.VX last year, and takeover talk also boosted Zurich Financial ZURN.VX stock.
Converium ditched a plan for a $300 million extra shareholder pay-out in the form of a reduction in the nominal value of its shares and abandoned litigation against Scor over the takeover in the United States.
The group, which reinsures other insurers, also said Chief Executive Inga Beale and finance chief Paolo De Martin would leave at the end of 2007.
Under the revised offer, each Converium share may be exchanged for 0.5 new Scor shares plus 5.5 francs in cash. Based on May 9 closing prices, the raised bid values each Converium share at 23.2 francs, Converium said.
“It is in the best interest of the Scor and Converium shareholders, as well as for clients and employees, to avoid protracted legal wrangling. This would have cost much more than raising the offer,” Vontobel said in a note.
Shareholders at the meeting voiced loud criticism as Converium had changed the agenda at short notice, causing the meeting to be interrupted once for legal advice, and postponed the naming of a Scor executive to Converium’s board.
But the meeting put no obstacles in the way of Scor’s offer starting as scheduled on May 29, and the merged company should be ready in time for the reinsurance industry’s key contract renewal meeting in Monte Carlo in September, Scor said.
Scor trusted that it could maintain enough business, countering earlier criticism by Converium that clients would defect on a large scale if the merger took place.
“I am quite confident we’re going to keep most of the business if we want the business,” Chief Executive Denis Kessler told journalists on the sidelines of the meeting.
There would be no revisions to Scor’s earlier estimates for synergies from the deal, Kessler also said, nor for the financial targets he has set for the merged entity. The extra money would be financed through senior and hybrid debt.
Scor’s offer is 8 percent higher than Scor’s previous bid of 0.5 new Scor shares plus 4 francs in cash, which valued Converium at around $2.5 billion and Converium shares rose almost 1 percent to 22.45 francs by 1347 GMT.
The bid will not be reduced by Converium’s proposed gross dividend of 0.2 francs per Converium share.
“I am very, very proud of what Converium has achieved ... it’s a terrific company ... and if it continued as a standalone company, I would be so happy to remain at its helm,” Converium’s outgoing CEO Beale told the meeting.
Scor said it would not lay off any Converium staff in Switzerland for a period of 12 months following settlement of the deal and would maintain a strong presence in Zurich, headed by Converium’s Benjamin Gentsch.
Shares in Zurich Financial rose following the news, after a large block of shares changed hands off-bourse on Wednesday, with dealers citing Warren Buffett, who has said insurers were on his radar-screen as takeover targets.
By 1347 GMT, Zurich shares were 3.2 percent higher, with some market participants quoting dividend washing as a possible reason — buying and selling of shares around the time of dividend payments for tax reasons.
(Additional reporting by Sven Egenter)
((Editing by Matthew Tostevin
($1=1.218 Swiss Franc) Keywords: CONVERIUM SCOR/
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