US Facilities Lawsuit Challenges Election of 2 Directors : Insurance: Seats were narrowly won by nominees of Fidelity National Financial, which has made a hostile takeover bid.
US Facilities Corp., which shareholders voted last week to put up for sale, filed a lawsuit Wednesday challenging the election of two directors nominated by the company that wants to purchase it.
US Facilities is asking Chancery Court in Delaware, where it is incorporated, to count 80,386 votes that independent tabulators had thrown out. The votes would be enough to defeat the nominees of Irvine-based Fidelity National Financial Inc., which is offering $79 million in a hostile takeover bid.
The right to vote those shares at last week’s annual meeting had been given on the same day both to US Facilities and to Fidelity, prompting tabulators to disqualify the shares.
The rejection of those votes “clearly disenfranchised our employees and frustrated their decision to vote for our directors,” said George Kadonada, chairman of US Facilities.
Fidelity disagreed. “In light of the shareholder mandate to get on with the process to sell or merge the company, this is a waste of shareholder time and money,” said Frank P. Willey, a Fidelity executive vice president.
Fidelity overwhelmingly won a shareholder vote on its proposal to put US Facilities, an insurance holding company, on the market. But its two candidates for board seats won by only 23,808 votes. Kadonada said no board meetings will be set until the election challenge is decided.
In unrelated Wall Street activity, Fidelity’s stock price fell nearly 10% Wednesday after an analyst at Merrill Lynch & Co. lowered his projections of the company’s earnings for this year and next. Fidelity’s stock closed Wednesday at $14.875 a share, down $1.625, on the New York Stock Exchange.
With interest rates higher and the refinancing market nearly gone, Michael R. Hughes at Merrill Lynch figured that Fidelity, the nation’s fifth-largest title insurer, would earn $2.20 a share this year and $2.55 a share next year, down from his previous estimates of $2.75 this year and $3.15 next year. For the first quarter, Fidelity earned 43 cents a share.
The stock beating should not affect Fidelity’s effort to buy US Facilities. Fidelity has more than $100 million on hand from a February stock sale and plans to pay cash for the acquisition, which would diversify its operations.
