Seeks Seat on Board : Fidelity National Buys Hammond Co. Stake
Fidelity National Financial Inc. in Irvine said Friday it has bought a 16.3% stake in the Hammond Co. and will try to gain a seat on the board of the Newport Beach-based mortgage banking firm.
Fidelity, a title insurance company operating in 30 states, purchased the stock to set up a working relationship with Hammond, said Frank P. Willey, Fidelity’s executive vice president and general counsel.
Fidelity hopes to offer title policies to those who take home loans out through Hammond, Willey said. But he emphasized that any such working relationship would be strictly on a friendly basis.
In its filing with the Securities and Exchange Commission, Fidelity said it was purchasing the stock for investment purposes only. Willey said the company would consider purchasing more stock but does not intend to turn its purchases into a takeover attempt or a “hostile situation.”
He said his colleagues plan to talk with Hammond executives soon to discuss working together and giving Fidelity a seat on the board at the next annual meeting of shareholders, scheduled for July 25.
With the purchase, Fidelity becomes Hammond’s second largest shareholder and would be entitled to one seat on the board. But Willey said his company does not want to force its way on to the board.
Thomas T. Hammond, the company’s chairman and president, owns 32.5% of the stock. He and five other board members own more than 43% of the stock.
Hammond said he did not know if he would willingly accept any Fidelity representatives on the board. While Fidelity’s managers are “well-regarded,” he said, “I just don’t know them.”
Fidelity started buying its shares April 20 on the open market, the SEC filing states. It picked up 77,785 shares in five transactions over the next month for prices ranging from $3.50 a share to $5 a share. On May 24, it purchased its biggest block, 255,500 shares, for $5 a share from Clark Estates Inc., a New York investment manager.
The Hammond Co. is trying to buy back 13.5% of its stock in an effort to enhance the stock, which executives believe is undervalued.
The company’s stock price had been steadily declining since the spring of 1987 when it was selling for $8.75 a share. It hit a low of $2.50 a share during the first three months this year and has been climbing since. It closed Friday at $5 a share, unchanged from Thursday’s close.
The company recently reported a loss of $1.1 million for the 1989 fiscal year, ended March 31. Hammond attributed the loss to fewer new loans, lower interest income and a $450,000 write-off related to its failed bid last fall to buy Mission Savings & Loan in Riverside.
