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Les perdants

5 Feb 2019 By Aimee Donnellan

All sides score poorly in France’s most recent insurance takeover debacle. Covea’s $9.5 billion pursuit of rival Scor collapsed last week amid a flurry of recriminations and lawsuits. Scor is stuck without a plan, and a wilted stock. Covea’s boss is left fighting breach-of-trust allegations. Even the deal’s advisers are tarnished. Activism may be the only hope to right what’s wrong for shareholders.

Going to war with your biggest shareholder is always risky. That’s what Scor did last week by suing 8 percent-owner Covea and its Chief Executive Thierry Derez. Scor alleges that while Derez was sitting on Scor’s board, he used confidential information to advance his own bid for the French insurer. Covea denies wrongdoing but said the “continued attacks and hostile tactics” meant it would drop its bid plans.

Bankers are also coming out badly. Scor threatened legal action against Barclays and Rothschild, which were advising Covea. Credit Suisse was taken to the UK high court and forced to hand over 400 emails regarding the transaction. The Swiss bank may have hoped to avoid future liability by bowing out of financing the deal in November, citing compliance and legal issues.

Scor boss Denis Kessler has the most to lose. Activist investor CIAM, with a 0.9 percent stake, has accused the 66-year-old of being an imperial leader, occupying both the CEO and chairman roles without a succession plan. That might have been acceptable had his defence included a credible plan to get the share price close to Covea’s 43 euros-a-share offer. On Tuesday, Scor’s share price was languishing at around 38 euros, having fallen 8 percent after the deal collapsed.

Investors are now being told to wait until September for a new strategic plan. They don’t have to: they can vote against Kessler’s board seat at the annual shareholder meeting in April. Even if he receives enough support to stick around, he’d be under mounting pressure to deliver growth and better corporate governance. Covea and the banks may be hamstrung by the courts for now. That leaves Scor’s destiny firmly in the hands of shareholders.


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