French reinsurer SCOR SE spurned an 8.3-billion-euro ($9.6 billion) unsolicited takeover offer from its biggest shareholder, a privately-held insurance company Covea, which said it’s still interested in pursuing a deal. SCOR shares climbed the most in almost a decade.


The proposal was met with unanimous opposition from SCOR's executive committee. In view of this, any public bid would be deemed hostile.


The board of directors of SCOR unanimously decided to refuse to initiate discussions with Covéa. It has reaffirmed its complete trust in SCOR's management to continue to create value.

Covea, a French mutual insurer that already has an 8.2 percent stake in SCOR, said Tuesday that it offered to buy the remaining stock for 21 percent more than the company’s previous closing price. SCOR responded that the bid is “fundamentally incompatible” with its strategy of staying independent.


Covea is an unlisted insurer whose brands include GMF, MAAF and MMA, and most of its business is in France. The deal would increase Covea’s premium income to more than 30 billion euros.


On Aug. 30, 2018, SCOR's board of directors reviewed the terms and conditions of this unsolicited proposal in detail and determined that it is fundamentally incompatible with SCOR's strategy of independence, which is a key factor of its development, that it would jeopardize the group's strong value-creating strategy and that it reflects neither the intrinsic value nor the strategic value of SCOR.

SCOR therefore “reaffirms its independence and acknowledges Covéa's decision to withdraw its proposal on a potential combination,” according to an official statement.


SCOR also formally denied the claim on the BFM business website that the Group has been in discussions with another partner for several months.


Covea said that it withdrew the offer after SCOR’s board met Thursday and refused to enter talks, but “reiterates its interest in a friendly transaction with SCOR.”


Contrary to this assertion, SCOR has held no discussions with Partner Re or any other company.


An acquisition of SCOR would help Covea almost double its premium income and diversify its business beyond home, auto, life and health insurance coverage. Insurers and reinsurers have become popular acquisition targets, both for competing firms and private-equity buyers, who are targeting such assets in search of higher returns.


Pricing pressure in the reinsurance industry is weighing on profits at companies like SCOR, overshadowing a drop in natural-catastrophe claims. Still, an earnings stream is emerging in European reinsurance that should be less cyclical than in the past, and valuations in the sector look “highly attractive,” JPMorgan Chase & Co. analyst Edward Morris wrote in a note Aug. 29, upgrading SCOR to overweight.


Attractive Valuations

SCOR climbed as much as 10 percent to 39.15 euros, below the bid price of 43 euros, and was up about 9 percent as of 1:30 p.m. in Paris. Before Tuesday, the shares had gained 5.7 percent this year, outpacing the 1.7 percent gain by the Stoxx Europe 600 Index.


The offer was to be financed with existing resources and with committed debt provided by Barclays Plc and Credit Suisse Group AG, Covea said. Thierry Derez, Covea’s chief executive officer, sits on SCOR’s board of directors.


AXA SA, the largest French insurer, earlier this year agreed to purchase XL Group Ltd. for $15.3 billion. Apollo Global Management has increased its stake in reinsurer Catalina Holdings Bermuda Ltd. amid a broader insurance push, and Carlyle Group has been expanding its team to do more deals in the sector.