Swiss-based reinsurer Converium has rejected a 3.1 billion Swiss franc ($2.5 billion U.S.) unsolicited bid for the company from French reinsurer SCOR.
In a statement, Converium said its board of directors said the bid was not in the best interest of the company's shareholders or customers. It rejected the bid because "it fundamentally fails to recognize the value of Converium's franchise and growth prospects."
The company said it believes it has the potential to achieve a "sustainable" return on equity of 14 percent by 2009.
SCOR offered 21.1 Swiss francs per share ($17.1 U.S.), amounting to 3.1 billion Swiss francs for the company.
SCOR said it has acquired 32.9 percent of Converium through a combination of cash and newly issued shares of SCOR.
The Paris-based reinsurer said it regrets Converium's initial reaction to the move and is in talks with the board.
"SCOR is fully convinced that the combination of Converium and SCOR is in the best interests of both companies, their shareholders and stakeholders," the company said in a statement.
The rating service Standard & Poor's, out of London, said the move by SCOR to acquire Converium could open the doors to other unsolicited takeover proposals.
Marcus Rivaldi, an S&P analyst, said the move would not impede Converium's return to a higher rating level, which awaits settlement over regulatory investigations stemming from former New York Attorney General Eliot Spitzer's investigations into finite reinsurance contracts. Questions were raised last year over some contracts that were suspected of being loans disguised as insurance policies to pump up earnings.
Converium's "triple-B-plus" financial strength rating remains on credit watch with positive implications, where it was placed in October of last year, S&P said.
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