BANKING : Delaware Ruling Keeps US Facilities Board Intact, Hindering Takeover Bid
A three-judge panel of the Delaware Supreme Court may have killed the hostile takeover bid for US Facilities Corp. in a ruling that keeps the Costa Mesa insurance carrier’s board of directors intact.
The court in Delaware, where US Facilities is incorporated, rejected an appeal by Fidelity National Financial Inc. in Irvine to place two Fidelity nominees on the board of US Facilities.
The decision, which reinstates directors John A. Allison and John F. Kooken, was cheered by George Kadonada, US Facilities’ chairman. “This ruling assures we can continue working successfully toward our goal of maximizing stockholder value,” he said Thursday.
William P. Foley II, Fidelity’s chairman, said that he still wants to buy US Facilities and that he will meet with his executives to plot the next step. “It’s a disappointment,” he said. “We can’t compel a sale on the same expeditious route we had planned, but it is not over.”
Investors, however, appear to have lost interest. The company’s stock price closed Thursday at $9.75 a share, up 12.5 cents a share in Nasdaq trading.
Fidelity, which owns 9.9% of US Facilities’ stock, had offered $15 a share, or about $79 million, at a time when US Facilities’ shares were in a slump, trading at about $10. The price reached $14.38 a share when Fidelity won shareholder approval, but it has since fallen back.
Fidelity, the nation’s fifth-largest title insurance company, had won an overwhelming vote by shareholders at the US Facilities annual meeting in May to sell the Costa Mesa company to the highest bidder.
But Fidelity’s director nominees seemingly squeaked to victory by 23,808 votes after independent vote auditors threw out 80,386 shares that appeared to be for management’s slate. Embarrassingly, the disqualified shares were owned by the company’s employees through their 401(k) retirement plan.
Auditors disqualified the shares because they couldn’t determine which side held the legitimate proxy--the right to vote those shares. Shareholders voting by proxy were supposed to turn in a white form if they were voting for management or a blue form if they were voting for Fidelity.
But Bank of New York, the 401(k) trustee, turned in both the white and the blue proxies. Furthermore, both proxies carried the same date, making it impossible to tell whether one superseded the other.
Fidelity acknowledged that the trustee intended to vote for management but simply failed to make that clear. But, in a nine-page decision, the Delaware Supreme Court panel said that “the investor should not be disenfranchised as the result of the record stockholder’s mistaken submission of conflicting proxies.”
