French reinsurer Scor's share price hit its highest level in more than two years on Jan. 31 following rumours that it is considering buying rival French reinsurer Axa Re. The share price rose to €2.11 ($2.55) on Jan. 31. The last time the shares were trading above €2 was back in Dec. 8, 2003, when the share price was €3.23.
Analysts reacted positively to the speculation, saying it could be a logical buy for Scor. "Normally deals do not work because the costs are too high. This deal could work because of the synergies," says Neil Manser, equity research analyst at investment bank Fox-Pitt, Kelton. "If it buys Axa Re at a discount to book value it could look like a positive deal."
Despite some analysts' enthusiasm for the deal, neither company has given any clear indication that it is considering the idea. When asked if Scor had approached the company, Axa Re's chief executive officer Hans-Peter Gerhardt declined to comment.
Some analysts doubt whether Scor could fund such a purchase. However, they add that the emergence of Scor as a potential acquirer is a sign that the company, which has struggled in recent years, is on the road to recovery.
"I don't know how Scor will finance the deal," says Frank Stoffel insurance analyst at investment bank WestLB Equity Markets. "Investors provided €1 billion worth of capital back in 2003. I am not sure if they will be happy to provide more. But if they are it could signal a return to strength for the company."
Scor has been restructuring its operations since 2002, following the appointment of chief executive Denis Kessler. The restructuring was prompted by a string of losses. The company's fortunes arguably reached their lowest point in July 2003 when rating agency Standard & Poor's downgraded it to BBB+ from A-. But Kessler's efforts seem to be paying off, and the company has recently enjoyed upgrades from S&P, Fitch and Moody's.
