A research firm said Friday that shareholders of US Facilities Corp., the target of a $79-million hostile takeover bid, should vote against management at next week’s annual meeting by approving a proposal to put the Costa Mesa insurance company up for sale.
Institutional Shareholder Services in Bethesda, Md., also recommended in a private report that shareholders vote at Wednesday’s meeting for two director candidates nominated by the pursuer, Fidelity National Financial Inc. in Irvine.
“We think Fidelity is offering an attractive premium,” said David Drake, a senior analyst at the research firm. Though he was willing to discuss the report, he would not release it because it was paid for by his clients, who hold large stakes in US Facilities.
Drake pointed out that a vote for Fidelity’s proposals would simply force negotiations that could lead to a higher price for the stock.
He also said that US Facilities has misled shareholders on several issues involved in the $15-a-share offer and Fidelity’s annual meeting proposals.
Raising questions, for instance, about the credibility of the offer and Fidelity’s ability to finance an acquisition were not justified, he said. Fidelity appears to be serious, he said, and able--with $104 million from a public debt offering in February--to buy US Facilities.
Institutional shareholders tend to agree.
“We think that they are serious and have the financial wherewithal to complete the deal,” said Gary N. Siegler, a partner in SC Fundamental Inc., a New York money manager that holds the largest single stake--9.8%--in US Facilities.
US Facilities was trading at $9 a share when Fidelity, the nation’s fifth-largest title insurance company, began aggressively acquiring its stock near the end of March. It closed Friday at $13.0625 a share, down 43.75 cents, on the Nasdaq market.
“We still contend that this is not an offer,” said US Facilities spokeswoman Cecilia A. Wilkinson. “Fidelity National is on a fishing expedition and has not offered a firm price for the company. It has admitted that its $15-a-share offer is not a firm price and is subject to reduction.”
Fidelity said at one point that the price could be modified if a review of US Facilities books showed that its investments and other assets were “significantly overstated,” its debts “significantly understated” or its earnings “not sustainable.”
Fidelity said it wanted to conduct that review “because we think that we may be able to increase our proposed price, not decrease it.”