Negative Investor Reaction Blamed : ICH, Southmark Abandon Merger Plan
Citing negative investor reaction, ICH Corp. and Southmark Corp. said Monday that they have ended their merger negotiations but will explore “alternative methods of doing business together.”
ICH, an insurance holding company based in Louisville, Ky., and Southmark, a financial services company in Dallas that is heavily involved in real estate, last month proposed to merge through a stock swap valued at about $240 million. The combined company would have been one of the nation’s largest life insurance firms with more than $100 billion of insurance in force and with assets exceeding $20 billion.
But the companies said they “cannot ignore the dissatisfaction with the merger as registered by the security markets, which may be due to unsettled market conditions and a misunderstanding of the benefits of the proposed transaction.”
A spokesman said Southmark stock and bonds had slipped significantly in price since the merger was proposed, while regulatory uncertainties put many holders of ICH securities and would-be investors in a watch-and-wait attitude.
In ending merger talks, however, the companies said they will seek new business deals to “allow each company to benefit from the other’s strengths without the projected delay required to obtain the necessary approvals and consummate a merger.” ICH spokesman Steve Bing explained that “we decided we could do many of the things we wanted to do without merging, as arm’s-length transactions between the companies.”
The companies said earlier that they sought to merge in order to increase their asset base and stabilize the return on their wide range of investments. Southmark, for example, assembles various financial packages, such as real estate syndications, that ICH insurance agents could sell. ICH’s insurance holdings include Bankers Life & Casualty and Massachusetts General Life Insurance, plus the $1-billion insurance operations that it acquired in 1986 from Houston-based Tenneco.
For its part, ICH sought to expand its annuity business, about $100 million a year, while Southmark markets about $1 billion in annuities each year, reselling some of that business. ICH could be a buyer for those products, Bing said.
