Into each life a little rain must fall. Denis Kessler, boss of French reinsurance group Scor, appealed for investors’ sympathy on Wednesday. He complained that a €8bn unsolicited bid approach would prove an unwelcome distraction during an upcoming trip to the billionaires’ playground of Monte Carlo. Coping with a typhoon or forest fire is probably tougher, even with Scor ultimately covering your costs.
Nor does Scor look very vulnerable. The would-be bidder is Covéa, a French mutual insurer that already owns 8 per cent. A standstill agreement means Covéa needs the recommendation of Scor’s board. Mr Kessler, who is respected for turning Scor round, opposes the deal.
The price of €43 per share suggested by Covéa is less comforting for Mr Kessler. It represents a steep 30 per cent premium over Scor’s three-month average share price. Reinsurers typically sell for about 1.5 times book value, Jefferies notes. Covéa, which is awash with surplus capital, would need to lift its price by just €5 to hit that. Shareholders might then chivvy Mr Kessler to the negotiating table.
The question is whether Scor would still be undervalued. The group has a superior credit rating and scarcity value as a quoted European reinsurer. A presentation in which Scor reiterated financial targets did not however provoke a rally in the company’s shares, which sit a few euros below the approach price.
Buying Scor would be an odd move for Covéa — a motor, home and life insurer traditionally catering to French bureaucrats. It would be odder still if Covéa increased its stake to 50 per cent of Scor, which is one mooted compromise. A mutual with modest disclosure and governance duties would then call the shots at a quoted business half-owned by minorities.
Covéa should offer more for the whole of Scor or walk away. As for Mr Kessler, reflect that although he is going to Monte Carlo, it is for an insurance conference. Perhaps he deserves our sympathy after all.