April 25, 2019 / 4:00 PM / in 24 days

SCOR's CEO to fight for his job against an activist fund

PARIS (Reuters) - Denis Kessler, the long-time chairman and chief executive of reinsurer SCOR, will on Friday become the first boss in France to fight for his job against an activist fund in a touch-and-go vote at its annual shareholder meeting.

The meeting brings to a head months of tension over French cooperative insurer Covea’s failed 8.2 billion euro ($9.1 billion) takeover bid for SCOR last year, which was opposed by Kessler and earned him criticism from French activist fund CIAM.

The fund, with just under one percent of SCOR shares, now wants Kessler removed from the board in a move that has deeply divided shareholders, with two worker unions and other investors contacted by Reuters split on their stance ahead of the vote.

CIAM has said it was happy for Kessler to remain CEO, but the executive has said he would quit if ousted from the board.

The boardroom drama comes amid growing scrutiny in France over the role of activist investors, which have grown increasingly active in Europe as they push for changes in strategy at companies which they feel are underperforming.

New York hedge fund Elliott Management recently burst on the scene, piling pressure on drinks giant Pernod Ricard, and the French government is examining measures to prevent activists from destabilizing French companies.

Part of CIAM’s tussle with SCOR centers on governance. It says Kessler holds too much power and the firm lacks the right checks and balances, and has also raised issues over Kessler’s pay.

“The dysfunctional governance of SCOR is obvious and triggers serious issues in the company’s management that increase risks for shareholders,” CIAM said in its appeal to shareholders.

SCOR’s company’s free float is widely spread, heaping uncertainty on Friday’s vote.

SCOR’s top management has called the biggest shareholders ahead of Friday to convince them to back 67-year-old Kessler, said Thomas Shrager, the managing director at Connecticut-based investment fund Tweedy Browne, which holds a 4.16 percent stake.

Shrager said he had voted by mail though declined to say whether he supported Kessler.

The firm’s biggest shareholder Covea, with 8.17 percent, BNP Paribas Asset Management, Swedish pension fund Alecta and French insurer Malakoff Mederic Humanis declined to comment ahead of the vote.

Proxy adviser Glass Lewis recommended to vote against Kessler, while two other advisers supported him. The three said they would reject Kessler’s pay package.

According to Reuters Eikon data, SCOR’s employees hold 3.61 percent of the shares.

The company’s largest labor union CFDT has decided to back Kessler to avoid uncertainties, said Patrice Salles, the CFDT representative. Rival CFE-CGC union has not given guidance to its members, but its representative at SCOR, Christophe Lefevre has said he would not back Kessler.

Reporting by Inti Landauro and Matthieu Protard, Editing by Sarah White and David Evans

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