Title insurer LandAmerica soars on Fidelity Nat'l offer
BANGALORE (Reuters) - Fidelity National Financial Inc (FNF.N), one of the largest U.S. title insurers, agreed to buy smaller rival LandAmerica LFG.N for about $126 million in stock as the title insurers seek to consolidate amid an industry slump triggered by a worsening housing crisis.
LandAmerica shares, beaten down by heavy losses in the recent past, soared as much as 104 percent Friday, to trade at a significant premium to the price offered by Fidelity.
Fidelity National shares rose as much as 33 percent.
"They (Fidelity) are taking out the third-biggest competitor in the industry basically for the price of its debt, a very inexpensive trade for Fidelity..," RBC Capital Markets analyst Mark Dwelle told Reuters.
Fidelity National will continue paying its current dividend of 60 cents a share annually through 2009, a company official said in a conference call with analysts.
The company expects the deal to close by March 31, 2009, it said in the call.
"There is nothing from a financing standpoint and approval standpoint that I think could be a serious roadblock," Dwelle said, but added gaining regulatory approval for so much of market share will be minor issue for the companies.
Shareholders of LandAmerica Financial Group, the No.3 title insurer, will receive 0.993 shares of Fidelity common stock for each share held, the companies said in a statement.
The deal represents a premium of about 74.5 percent based on LandAmerica's closing price of $4.75 on Thursday. LandAmerica had 15.2 million outstanding shares as of July 30, 2008.
"The unprecedented credit freeze and depressed real estate market have negatively impacted our business to the point that it has become increasingly difficult for LandAmerica to remain an independent public company," LandAmerica's Chief Executive Theodore Chandler said.
As LandAmerica shares were trading around $8 just two days back, the premium is the more likely to be the difference between that and the new offered price, Dwelle said.
Glen Allen, Virginia-based LandAmerica on Wednesday postponed the release of its third-quarter results sending its shares down as much as 35 percent on Thursday.
For Fidelity, investors quite liked the value of the deal that they managed, he added.
BOON FOR AN AILING INDUSTRY
The companies will regain their place as big players in the title insurance base when real estate markets stable down, Dwelle said. "Probably real estate markets will be in a better position by the time this deal gets closed." Continued...
