Teledyne Merger With Firm Ends Bizarre Chapter : Acquisitions: The conglomerate’s small shareholders had fought for years for a dividend or buyout. But the current offer has left some of them bitter.

As Alfred J. Rubbelke, a small investor, lay on his deathbed in St. Paul last year, he made a final request that his heirs carry on the fight he had waged for years against Teledyne Chairman Henry E. Singleton.

“On his deathbed, he made me promise I would never sell the Unicoa shares unless I got what they were worth,” recalled Rubbelke’s brother, Irvin. “One of the last things he said was ‘Don’t give those shares to Singleton.’ ”

Those shares of Unicoa, since reorganized as the Chicago-based United Insurance Co. of America, are part of one of the more bizarre stories in stock market history.

Teledyne owned 99.2% of the shares of United Insurance and the balance of 0.8% were held by a group of 1,130 small shareholders, many elderly who had fought Teledyne for years for a cash dividend or buyout.

The strange episode quietly ended Dec. 28, when United Insurance called a special meeting of shareholders in Chicago and voted to merge with Teledyne. Under the merger, Teledyne would buy in the stock for $321.19 a share for a total of $10.5 million.

Why Teledyne perpetuated the unusual public status of United Insurance since gaining majority control 20 years ago was never clear. In its shareholder meeting announcement, it asserts that the company’s “operating efficiency and flexibility” will be improved and that the merger will eliminate the costs of meeting federal reporting requirements for a public firm.

In addition, Teledyne is preparing to spin off its four insurance subsidiaries, including United Insurance, a move that will pare the size of the Los Angeles-based conglomerate by 20%.

During the merger, Teledyne hasn’t been particularly interested in what the elderly individual shareholders think about the offer. In fact, the official notice of the meeting stated bluntly: “We are not asking you for a proxy, and you are requested not to send us a proxy.”

Indeed, with its 99.2% ownership, Teledyne called all the shots as it had for years, much to the consternation of Rubbelke and a small band of individual shareholders who would keep in touch to commiserate about the sad state of their investment in United Insurance.

Even though United Insurance has been a publicly traded company, virtually no brokerage or investment firm actually traded the shares. It was not listed on any organized exchange and did not even have a trading symbol.

The price of the shares was artificially depressed, and Teledyne for a long time resolutely refused to pay a dividend, though it finally distributed $8 per share in 1987 and again in 1988.

Each year, Rubbelke would attend the Teledyne annual shareholder’s meeting, demanding that fair value be paid to the shareholders.

When Rubbelke again stood up at the Teledyne annual meeting in 1985, Singleton dismissed his demands and told him he should present them at the United Insurance annual meeting. That, however, would have been very difficult to do, since United Insurance was having its meeting at precisely the same time in Carson City, Nev.

Legal experts say that minority shareholders in such situations are poorly protected by existing securities laws. “If you have a stock for which there is no market and which pays no dividends, you have what is known as an illiquid dog of an investment,” a securities attorney said once about the United Insurance situation.

For a long time, Mike Kinsella, a trader at the Philadelphia brokerage of Hopper Soliday & Co. was one of the few market makers in United Insurance shares, but even he finally gave up. “Somebody dies and a few shares trade,” he said in a 1985 interview.

“There were a lot of hard feelings about that company,” Kinsella said Friday. “I dropped it. These kinds of stocks are what we call no-brainers.”

And for good reason. The stock traded at $90 a share in 1985, a year when the firm had profits of $93.84 a share and a book value of $261.84 a share.

The last quote on the stock that even Teledyne could locate was for $190 per share last May, when its book value had risen to $306.18 and earnings were $24.52 per share, according to Teledyne’s shareholder meeting notice.

Teledyne’s plan to pay $321.19 for United Insurance shares is equal to the firm’s current per-share book value or shareholder equity. Teledyne hired the investment firm Goldman, Sachs & Co. to perform an independent analysis of the price, and the firm determined it was fair.

“I would have imagined that Mr. Rubbelke would have been pleased with the price, since it is full value,” said Berkley Baker, a Teledyne spokesman.

But Irvin Rubbelke has a much different view of how his brother would have considered the Teledyne offer.

“I am sure he would not have been pleased with that offer,” said Rubbelke, a retired engineer and active investor. “They are not paying what it is worth.”

Herbert Goodfriend, an insurance industry analyst at Prudential-Bache Securities, said that such insurance companies as a group sell for an average of 27% above their book value, though it is impossible to know whether United Insurance should sell above or below that average.

Rubbelke said he never received the shareholder meeting notice from United Insurance and plans to fight against the sale of the shares if he can. Under the Illinois Insurance Code, dissenters can exercise special rights to an independent valuation of common stock in such situations. But shareholders who wished to exercise those rights were supposed to file a written objection before the special meeting Dec. 28.

“Al said Singleton wasn’t being fair to the stockholders and I don’t think he is being fair now,” Rubbelke said.