French reinsurance group Scor has secured 32.9% of the share capital of Swiss reinsurance company Converium. The group's full offer for Converium, which, according to Reuters, valued the company at $2.51 billion, was, however, rejected on the grounds that it did not recognize the value of Converium's franchise and growth prospects.

Of the 32.9% that Scor secured, 8.3% was through direct market purchases and 24.6% was through share purchase agreements. The consideration for the acquisition comprises of 20% cash and 80% newly issued Scor shares. This amounted to a price of CHF21.1 per Converium share, based on the closing share price of Scor on February 16, 2007.

Converium commented that it rejected the unsolicited proposal to acquire the company at CHF21 per share as it was not in the interest of the company, its shareholders or its customers. Although the company has not been performing well recently, Converium added that it has the potential to achieve a sustainable return on equity of 14% by 2009.

Scor, however, responded to the news in a press release saying, Scor regrets the Converium board’s initial reaction to the proposal. The reinsurer added that, if the companies did combine, it would create a leading global multi-line reinsurer.

Converium is currently waiting for the US Securities and Exchange Commission to finish an investigation that would give it the higher credit rating it needs to obtain new contracts. In the meantime, however, the reinsurer is losing money, prompting industry analysts to comment that the merger would make sense.

Pierre Flabbee, an analyst at Kepler Equities in Paris, commented that the move would give both companies the scale they lack. Cited in Bloomberg, Mr Flabbee said: This will create a bigger, more solid reinsurance company, which will be able to have better ratings.

According to Bloomberg, following the news, Scor shares fell 6.3% to E19.78, the biggest drop in eight months, while Converium surged 12% to CHP21 in Zurich.