Farmers and Batus Both Claim Win on Resolution Vote

Farmers Group and Batus Inc. both claimed victory Friday evening on a bitterly contested non-binding resolution calling on Farmers’ board to reconsider its refusal to negotiate on a $4.35-billion hostile takeover bid from Batus.

Both sides agreed that Batus received the votes of 27.25 million shares while Farmers won 26.52 million, with 2.34 million shares abstaining and 15 million not voting. Batus, the U.S. arm of London-based tobacco and retailing conglomerate BAT Industries, immediately said it won because it garnered more votes.

But Farmers, a Los Angeles insurance holding company, countered that Batus was ignoring Farmers’ bylaws, which state that approval of a resolution requires more than half of all votes, including abstentions. “Batus knows this perfectly well,” Charles L. Schultz, Farmers senior vice president for finance, said in an interview. The bylaws apply whether the resolution is binding or non-binding, he added.

Batus spokesman Toney File said the bylaws do not apply to non-binding resolutions. “The abstentions were not voted on the question. Abstaining means exactly that; they did not vote.”

Setback for Farmers

The strong support that Batus received was nonetheless an indication of the suitor’s support among the institutional investors who own two-thirds of Farmers’ stock, insurance industry analysts agreed.

“The odds would favor management proposals in today’s corporate world,” said Richard A. Kayne, president of Kayne, Anderson & Co., a Los Angeles brokerage. Farmers and Batus had each taken out full-page newspaper advertisements seeking shareholder support on the resolution.

Earlier Friday, Farmers received a setback when Arizona’s insurance department gave regulatory approval to Batus’ takeover bid. Arizona was the first of nine states to review the deal. Schultz said Farmers would seek to overturn the decision, most likely by asking for a rehearing before the department.

In another development, Farmers admitted at Idaho Insurance Department hearings that its life insurance subsidiary invested $201,000 last year to buy 6,500 shares of preferred stock in American Brands, which owns American Tobacco Co., Franklin Life Insurance Co. and Southland Life Insurance Co.

Farmers has argued repeatedly that it is wrong for a tobacco company such as Batus--which makes Kool and Capri cigarettes, among other brands--to buy a company that sells life insurance. Farmers has claimed that its non-smoking discounts might be canceled if Batus were to take over the company. Batus has promised to retain the discounts.