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Activist investor pressures French reinsurer Scor on takeover

by Inti Landauro

An activist investment fund on Tuesday put pressure on French reinsurer Scor's management after it rejected a friendly 8.2 billion euro ($9.57 billion) takeover offer late last month.

French activist investment fund CIAM asked Scor's Chief Executive Denis Kessler to engage in talks with French cooperative insurer Covea regarding the takeover offer and threatened legal action.

Kessler justified the decision to reject the offer saying Scor needed to remain independent and that the price did not reflect Scor's "intrinsic or strategic" value.

The CIAM move supports Covea, which already owns about 8.5 percent of Scor, in its takeover bid as it shows some minority shareholders disagree with the management's position and would be ready to sell. According to a source close to Covea, the firm is working on a new approach.

CIAM's president, Catherine Bejral, said in its letter to Scor that the management was legally obliged to talk to Covea.

"I would not hesitate to hold you and the Board of Directors legally liable for a decision which would constitute gross management negligence," she added.

CIAM holds 0.77 percent in Scor.

Since Covea offered to pay 43 euros per Scor share, a premium of about 20 percent, Bejral asked Kessler to detail his proposals to boost the share price above that level.

According to the Financial Times, Ian Kelly, Scor's head of investor relations, said CIAM intended to make a short-term profit out of the situation. "We deem this unacceptable," he told the newspaper.

A spokeswoman for Scor confirmed Kelly's comments.

Covea, an increasingly assertive player on the French insurance market, hopes a Scor deal will make it a major actor on the European stage, where a process of consolidation is set to create more opportunities for acquisitions.

The insurer is bound by a 2016 covenant to submit any stake increase to the board for approval until at least April 2019 and says it plans to keep its word.

The fragmented nature of Scor's ownership, with no one holding a larger stake than Covea, makes it a potential target for a hostile takeover.

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Ahold Delhaize rejects calls for shareholder vote on takeover defense

At its AGM, Dutch-Belgian supermarket group Ahold Delhaize said that a defence mechanism could be extended indefinitely and without investor approval, rejecting calls from CIAM and others for a shareholder vote on whether to retain a “poison pill” defence option. Reuters reports that CIAM and other shareholders in opposition of this could ask a judge at Amsterdam’s Enterprise Chamber to call an EGM to vote on the matter.

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Ahold Delhaize urged to put poison pill decision to vote

The association for Dutch retail investors (VEB) joins CIAM in demanding that Dutch-Belgian supermarket operator Ahold Delhaize submits any decision about renewing its poison pill structure to shareholders’ vote. Reuters also reports that CIAM wrote in a letter to management that the poison pill structure depresses shareholder value in Ahold.

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Tragic kingdom

Reuters Breaking Views
by Neil Unmack

Disney is behaving like Scrooge McDuck with its French investors. The maker of “Mickey’s Christmas Carol” wants to buy out shareholders in Euro Disney at a price that may downplay the Paris theme park’s potential.

Euro Disney’s share price has fallen 94 percent in the last 20 years. One shareholder, hedge fund CIAM, is suing the parent group, and argues the Paris attraction is managed to benefit the Walt Disney Company at the expense of other shareholders. Now the U.S. parent, which owns 86 percent of the French entity and is also a creditor, is offering to buy out minorities at a premium of 67 percent, or 1.6 billion euros.

Were Euro Disney merely an unprofitable theme park, that might look fair. Add in debt of 1.2 billion euros, and the enterprise value of 2.8 billion euros is about twice the revenue Oddo Securities forecasts Euro Disney will make in 2017. That multiple is in line with the leisure sector, but generous for a business that, after capital expenditure, hasn’t generated free cashflow since 2011.

Two things suggest Disney is taking investors for a ride. First, it takes fees for licensing that CIAM says are between double and quadruple the market rate of around 2.5 percent. One board member resigned recently citing the park’s dismal profitability. Then there’s property. Euro Disney has a contract to buy, develop and sell over 1,000 hectares of Parisian land. A study commissioned by CIAM reckons that could be worth 1.9 billion euros. Disney disagrees with these arguments, and points out that the French market regulator has approved a lower price.

Assume Euro Disney can grow EBITDA to 210 million euros in 2018, which would imply a plausible margin of 15 percent. On an ungenerous multiple of 10 and including the land, the total value could be about 4 billion euros, or 2.8 billion euros after stripping out net debt.

Fair value is a useful yardstick, but battles with minority investors often come down to the price it takes to make a nuisance go away. Many of Euro Disney’s shareholders stick around as much for the theme park discounts as the shareholder returns. Disney can afford to be a little more generous, but Scrooge-like changes of heart only happen in fiction.

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