Independence Day at American Title

Feeling like the ignored stepchild of its mammoth parent, a group of managers at a subsidiary of Fidelity National Financial Inc. have tentatively agreed to buy a 60% stake in their unit for $6.5 million.

Managers at American Title Insurance Co., which Fidelity bought four years ago, are close to completing a deal that would likely be financed both by Fidelity and outside lenders, said Frank P. Willey, Fidelity’s president.

Fidelity, the nation’s fourth-largest title insurer, would retain a 40% interest in the company and continue to underwrite the title policies that American sells, said Fidelity’s chairman, William P. Foley II.

Foley said he disagreed with the management group’s feeling that the subsidiary had been a low priority as part of Fidelity.

“But they also want to create a Fidelity-like momentum, acquiring other companies and growing,” he said. “They compare themselves to where Fidelity was in 1985-86.”

Foley released details of the “handshake agreement” Tuesday after denying rumors that he was trying to sell Fidelity, which he has built through acquisitions from Arizona storefront operations in the early 1980s.

Title and mortgage sources had been hearing for a few months the Foley was poised to sell Fidelity and keep American for himself. But Foley said the opposite is true. “Management of American Title came to us with a proposal to buy American,” he said.

Foley won’t be a part of the management-led purchase. The deal still is subject to a final contract and approval of regulators.

“We’re helping them in every way,” Foley said. It’s not just the $4-million profit that Fidelity expects to reap on the sale that provides the incentive for helping. “We’ll get 40% of whatever they earn,” Foley said.

American had been a subsidiary of Meridian Title Insurance Co. in Reading, Pa., when Fidelity bought Meridian in 1992 for $21.1 million in cash and stock. Fidelity absorbed the underwriting functions of Meridian and American, but kept American operating as a title agency subsidiary.

Based in Irvine with its parent company, American has 438 employees in 13 California counties and in Phoenix’s Maricopa County. Foley said he expects the unit to earn about $2 million this year on anticipated revenue of $50 million.