Founder of Irvine’s Cruttenden Roth Sells an 18% Stake

Fidelity National Financial Inc., the nation’s fourth-largest title insurance company, said Friday it acquired an 18% stake in Cruttenden Roth Inc. investment banking firm from Chairman Walter Cruttenden III.

Fidelity, based in Santa Barbara, also will make a $3.5-million loan to Cruttenden to be used to expand operations.

Cruttenden is Orange County’s largest investment banking firm, with 225 employees and seven offices in three states. It specializes in raising money for small companies through private and public offerings.

“This will give us the ability to be kept abreast of some investment opportunities for emerging companies,” said Frank P. Willey, Fidelity’s president.

Under Chairman William P. Foley II, Fidelity has branched far beyond its title-insurance roots into such industries as restaurants, shipping equipment and computer services. It owns sizable stakes in Carl’s Jr. parent CKE Restaurants in Anaheim and Green Burrito parent GB Foods Corp. in Irvine.

For Foley, the investment gives him greater ability to do what has become a growing passion--making deals. He built Fidelity from a storefront operation in Phoenix by cobbling together a number of title insurers and continuing to acquire and diversify.

For Walter Cruttenden, a 47-year-old third-generation investment banker, the sale marks a further scaling back from the company he founded in 1984. Last fall, he gave up the chief executive reins to partner Byron Roth, who now is the firm’s largest shareholder with a 30% stake.

Cruttenden was vacationing Friday and couldn’t be reached for comment.

Fidelity is paying $5.8 million--$2 million in cash, the rest in Fidelity stock--for the stake and an option to purchase an additional 6% of Cruttenden, according to people familiar with the deal.

Roth said he was “looking forward” to working with a high-profile deal maker like Foley, in part to help ensure that Cruttenden survives the consolidation that is sweeping the financial services industry.

Like Foley, “I’m a buyer, not a seller,” he said.

Last year, Cruttenden was the nation’s largest underwriter of so-called micro-cap companies, those with market capitalizations of less than $100 million.

The firm also has been tainted by the collapse of some of the companies it took public. Cruttenden underwrote the initial stock offering of Aviation Distributors, which on Thursday agreed to settle three class-action lawsuits that charged Aviation officials with falsifying sales figures.

Times staff writer James S. Granelli contributed to this report.