Fidelity-Five Star Deal Collapses

Fidelity National Financial Inc., an Irvine-based title insurer and real estate service provider, said it has ended talks to buy Five Star Holdings Inc., a privately owned property and casualty insurer.

Executives at both Fidelity National, the fourth-largest U.S. title insurer, and Five Star mentioned stock market declines as a reason for the collapse of the deal, which was announced Aug. 11.

Dirk McNamee, president of Five Star’s operating unit, Five Star Insurance Co., blamed “the volatility of the market in general and, in particular, the Fidelity stock.” He added, “We were at an impasse over how the pricing formula would work.”

Fidelity National shares fell $2.31 on Thursday, closing at $31.50 on the New York Stock Exchange. The stock has fallen 27% from a high of $43.06 on July 20.

The company was offering 600,000 of its shares for Five Star, or about $24 million when Fidelity National stock traded at $40. The proposed agreement included a $36 floor below which terms would be revised.

This marks the second failed merger involving Fidelity National in the last five weeks. On Aug. 31, Denver-based thrift Matrix Capital Corp. said it abandoned a plan to join Fidelity National.