1st Executive Sues to Block Offer by ICH
Shareholders of First Executive Corp. Los Angeles, have filed a lawsuit seeking to stop a $12-a-share tender offer by ICH Corp. of Louisville, Ky., for up to 11.2 million shares of First Executive, the two insurance holding companies disclosed Thursday.
The class action, filed in a Delaware state court, also seeks to void a five-year standstill agreement between the two last November, under which ICH agreed not to acquire more than 25% of First Executive.
The suit alleges that the agreement is a means of entrenching First Executive management and allowing ICH to take control without paying a fair price, according to William J. Adams, First Executive vice president and general counsel, who said the claims were without merit.
Michael E. Cottle and Morris M. Rottman, stockholders of First Executive, brought the action against the firms and all of First Executive’s directors.
ICH said that, despite the suit, it expects to complete the cash offer, which would cost $134.4 million if 11.2 million shares are tendered.
The firm added that the offer of Jan. 6 may be extended beyond its Feb. 9 expiration date. ICH also said the plaintiffs’ claims were without merit.
Crash Damage
Los Angeles investor Travis E. Reed said recently that he is continuing to seek to arrange financing for an intended offer for First Executive stock at a higher figure than ICH’s.
Reed, who controls 4% of First Executive, called the $12 tender offer “totally inadequate and a gross misrepresentation of the true value of First Executive.”
On Jan. 26, First Executive said its board had decided that it “should express no opinion and remain neutral” on the $12-a-share ICH offer.
In an earlier agreement, First Executive agreed to give ICH an option to buy newly issued First Executive stock for $17.15 a share, but that was revised after the firm’s stock price dropped below $9 a share after the Oct. 19 stock market crash.
After the company’s annual meeting in December, Reed said he believes that the purpose of the $17.15 was to help entrench First Executive’s management.
During the meeting itself, Reed criticized Fred Carr, First Executive president and chief executive, for continuing the firm’s much publicized relationship with the “junk bond” business of Drexel Burnham Lambert. Carr defended his firm’s investments in the high-yield, high-risk bonds as good business for First Executive.
