US Facilities Wins Victory Over an Unfriendly Suitor : Insurance: Court decision is a setback to plan of Fidelity National to take over the O.C. firm.
US Facilities Corp. won a legal battle Friday against unfriendly suitor Fidelity National Financial Inc. when a Delaware court overturned the election of two directors nominated by Fidelity.
US Facilities said the Chancery Court in Delaware, where the Costa Mesa-based stop-loss insurer is incorporated, decided to reinstate 80,386 shareholder votes--enough to defeat the two nominees of Fidelity, the Irvine title insurance company that is offering $79 million in a hostile takeover bid.
Independent tabulators had thrown out those votes at US Facilities’ annual meeting in May because it appeared that the voting rights to those shares had been given to both US Facilities and Fidelity. The votes were cast by US Fidelity’s employee 401(k) plan. But US Facilities filed a lawsuit challenging the tabulators’ action.
The court’s ruling allows US Facilities to install two of its own longtime directors and is a setback to Fidelity, which disclosed in April its intent to acquire US Facilities as part of a strategy to diversify its business. Fidelity owns 9.6% of US Facilities’ common stock, but having two directors on US Facilities’ board would have helped the takeover effort.
“I’m disappointed,” said Frank Willey, Fidelity’s executive vice president and general counsel. Willey conceded that the ruling may slow down Fidelity’s takeover bid, but he said it will not stop the sale of US Facilities to Fidelity or anybody else.
Fidelity won stockholder support at US Facilities’ annual meeting for a resolution to put US Facilities on the market. But US Facilities decided to put that resolution on hold until its election challenge was settled.
George Kadonada, US Facilities’ chairman and chief executive officer, said in a statement that the board would address the stockholder resolution to sell or merge the company. But he noted that it was a non-binding resolution, meaning the board does not have to do anything about the resolution, passed by less than a majority of the outstanding shares.
The Delaware court’s ruling Friday had little effect on the two companies’ stock. Fidelity closed on the New York Stock Exchange at $12.625 a share, up 50 cents. US Facilities’ shares were unchanged at $12.875 in Nasdaq trading.
