Batus Hints It Might Increase Offer for Farmers
Batus Inc., the U.S. unit of a British conglomerate seeking to acquire Farmers Group, told shareholders of the insurance holding company that it might increase its offer from the present $63 a share.
“We would seriously consider paying an even higher price in a friendly transaction supported by the board of Farmers Group,” Patrick Sheehy, Batus’ chairman, said in a letter addressed to shareholders of Los Angeles-based Farmers.
Sheehy noted, however, that Farmers’ directors have rejected the offer and repeatedly refused to discuss the price, and a spokesman for the company repeated Monday that the board’s position remains unchanged.
Farmers’ stock closed Monday at $59.625 a share, up 62.5 cents, in over-the-counter trading. “Not once,” Sheehy wrote, “has the Farmers Group board specifically addressed the issue of what would happen to the price of your stock if the Batus offer is defeated.” Farmers stock was trading for about $43 a share when Batus disclosed its first offer.
Batus is the Louisville, Ky.-based subsidiary of B.A.T. Industries, a giant conglomerate based in Britain with principal operations in tobacco, retailing, paper and financial services.
Its letter to Farmers’ shareholders followed an appeal to them last week by Farmers’ Chairman and Chief Executive Leo E. Denlea Jr. through a full-page ad in the Wall Street Journal.
In it, Denlea urged the company’s shareholders to turn a deaf ear to Batus’ attempts to win their votes for a resolution--to be offered at Farmers’ annual meeting May 20--that would urge the company to negotiate with Batus.
“We urge you to refrain from voting until you have received and read all the information in your company’s regular proxy statement,” Denlea said. (The proxy statement is expected to be issued this week.)
Batus called the ad “incorrect in many respects” and “particularly confusing to stockholders” because it urged support of a proxy not yet distributed.
In its letter Monday, the company noted that Farmers has revealed that its representatives “have held discussions with a third party to explore the feasibility of a leveraged buyout of the company” by management and other investors.
“Don’t you find it strange,” Sheehy asked in the letter, “that they have failed to contact Batus, the only company that has made a public offer for their shares?”
Meanwhile, the California Department of Insurance scheduled a public hearing for May 4 through 6 on Batus’ proposed acquisition, following similar hearings April 20 by the Kansas Insurance Department and May 2 by its Arizona counterpart.
In all, Batus will need regulatory approvals in nine states before it can buy more than a 10% stake in Farmers or otherwise try to assume control.
