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Fidelity Presses Bid to Acquire US Facilities : Merger: Irvine firm says it will begin seeking votes from Costa Mesa insurer’s shareholders to put up company for sale.

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TIMES STAFF WRITER

Fidelity National Financial Inc., which set the stage last week for a hostile takeover attempt of US Facilities Corp., made it official Monday by saying that it will begin seeking votes today from the Costa Mesa insurer’s shareholders for approval to put the company up for sale.

Fidelity, the nation’s fifth-largest title insurer, said that directors of US Facilities were simply using a “stall tactic” by deciding Friday to delay negotiations and to set up other procedures to consider the $79-million merger bid.

William P. Foley II, Fidelity’s chairman, said Monday that he asked his counterpart, US Facilities Chairman George Kadonada, in a brief telephone conversation Sunday to delay the May 25 annual meeting of US Facilities for a month to give directors of both companies time to negotiate and to show that Kadonada’s firm was proceeding in good faith.

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“We still want this to be friendly, though it appears we’re being very aggressive,” Foley said Monday.

US Facilities, a medical business, property and casualty insurer, refused to delay the scheduled meeting.

A spokeswoman for the company said US Facilities would have no comment beyond stating the results of its Friday board meeting. After a daylong meeting Friday, directors decided to delay any decision until an unspecified mid-May meeting, appoint a committee of three non-management directors to review the acquisition proposal and hire an investment banking firm to give it advice.

In a strongly worded letter last Tuesday to Kadonada, Foley sought a friendly takeover that would make US Facilities a wholly owned subsidiary with all of its management intact. But the letter also said that deadline pressures required Fidelity to seek proxies--rights to vote shares from US Facilities stockholders--to get the issues addressed at the annual meeting.

A document filed with the Securities and Exchange Commission show that Foley first sought a “strategic alliance” with Kadonada late last year and that Kadonada agreed to consider it and to respond. But he never responded, the document stated.

Technically, Fidelity’s $15-a-share proposal has been withdrawn, but Foley said his company would offer the same “very lucrative amount” to shareholders. The amount is 67% above US Facilities’ $9-a-share stock price on March 20, the day before Fidelity started buying shares aggressively and pushing up the price.

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Fidelity also said Monday that it has increased its stake in US Facilities from 8.2% to 9.25% by buying 60,000 more shares last Thursday and Friday at $13.88 to $14 a share. Foley said Fidelity bought more on Monday and would buy enough to give it just under 10%, a level that would require additional filing requirements with federal regulators.

The price of US Facilities stock closed Monday at $13.50 a share, down 25 cents a share from Friday’s close on the Nasdaq market system. Fidelity’s stock closed at $17.25 a share, down 37.5 cents a share on the New York Stock Exchange.

Starting today, Fidelity will seek proxies to put two unaffiliated directors on US Facilities’ board and to pass a shareholder resolution putting the company up for sale and approving measures for independent reviews of bids. Last week, Fidelity sought only one board seat.

Foley acknowledged that US Facilities could block his company from presenting its proposals at the May 25 meeting. Fidelity, therefore, is seeking proxies representing at least half the shares outstanding so that if it is blocked, it can refuse to attend the meeting and create a lack of a quorum, causing the meeting to be canceled.

Fidelity wants to acquire US Facilities to help it smooth out earnings and avoid the cyclical nature of the title industry where fluctuating interest rates can greatly raise or lower profits.

US Facilities reported net income of $6.8 million last year on revenue of $112 million. Fidelity posted $36.3 million in earnings on $575.4 million revenue last year.

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