Lindner Spins Off Republic American

Reclusive Cincinnati financier Carl H. Lindner has spun off Republic American Corp., an Encino-based insurance holding company, through a $238-million initial public stock offering.

According to a final prospectus issued last week, 13.6 million Republic American shares were offered earlier this month at an initial price of $17.50 each.

Lindner, 67, who is chairman and chief executive, retains about one-third of the company’s stock through Great American Insurance, one of many companies through which he does business, according to the prospectus.

Lindner specializes in taking over troubled companies and turning them around. One of his most successful projects was Penn Central, the once-bankrupt railroad that is now an energy, electronics and telecommunications concern based in Greenwich, Conn.

Part Owner of Reds

He also is a partner in the Cincinnati Reds baseball team and controls the financially troubled Mission Insurance Group Inc. in Los Angeles. In October, the state insurance commissioner’s office declared Mission’s major subsidiaries insolvent and placed them in conservatorship.

Republic American is the holding company for Republic Indemnity Co. of America, which the prospectus said is believed to be one of the 10 largest writers of workers compensation insurance in California, with an estimated 3% of the state’s $4-billion annual market.

In 1985, Republic American earned $19 million, or 67 cents a share, on revenue of $144.5 million, the prospectus said. The company has 280 employees.

Before the offering, Republic American was owned entirely by Great American, a wholly owned subsidiary of American Financial Corp., a Cincinnati-based holding company owned by Lindner and his family.

According to the prospectus, Great American, which offered 11.2 million shares, will receive at least $184.7 million in proceeds. Republic American, which offered 2.4 million shares, will receive at least $39.5 million.

Proceeds for Investments

The prospectus said Republic American’s proceeds will be used for investments and to provide operating funds for Republic Indemnity.

The document said the money may be used for acquisitions of “additional financial businesses,” although the company said it is not now negotiating to buy another company. The company is expected to have about $40 million in cash and short-term securities after the offering, the prospectus said.

Proceeds for Great American and Republic American, as well as the total value of the offering to the public, will change if the underwriters exercise an option to buy 2 million more shares within 30 days.

In a stock offering, underwriters typically are given such an option. If it is exercised, the overall amount of the offering will increase to $273.7 million, Great American’s proceeds will increase to $212.4 million and Republic American’s proceeds will rise to $45.5 million, the prospectus said.

Range of Stake

Great American’s stake in Republic American could be as high as 8.8 million shares, or 39.3% of the outstanding shares, or as low as 7.12 million shares, or 31%, depending on whether the underwriters exercise the options.

According to the prospectus, Republic American’s assets and liabilities were increased substantially early last year through transfers from Mission of $158 million in workers compensation loss reserves--money set aside to pay insurance claims--and $120.5 million in cash and securities. Republic American also received warrants, which it later sold to American Financial for $9.1 million, to buy Mission stock, the prospectus said.

Drexel Burnham Lambert Inc. and Prudential-Bache Securities Inc. jointly managed the offering. Republic American’s stock closed at a bid price of $17.37 1/2 Monday, off 12 1/2 cents from Friday.