Fidelity National Sells Stake in O.C. Investment Firm
Hoping to persuade Wall Street that he’s more focused on acquiring Chicago Title Corp. than on chasing deals, the chairman of Fidelity National Financial Inc. said Tuesday that he sold his company’s 19% stake in a Newport Beach investment banker.
Cruttenden Roth Inc. said it agreed to pay about $6 million for Fidelity’s stake. The payment includes a $2-million loan from Fidelity, which will retain a board seat on the privately held investment banking company.
William P. Foley II, who has used his Irvine title insurance company to buy stakes in numerous related and unrelated companies, also said that Fidelity will likely divest other non-core investments. He declined to specify which interests might be sold.
“We are focusing on real estate financial services,” Foley said. “It just doesn’t make sense anymore to hold non-core interests.”
The moves are designed partly to allay investor fears that Foley, a consummate deal-maker, has spread himself too thin among investments and may be distracted from running the merged Fidelity-Chicago, which would be the nation’s largest title insurer.
“This is a way for them to say, ‘Let’s limit the distractions,’ ” said Michael Grondahl, an analyst at U.S. Bancorp Piper Jaffray in Minneapolis. “Fidelity is taking on a big chunk of debt to pay for this acquisition, and they are going to need operations to run efficiently to pay that down.”
The $1.2-billion merger, announced last summer, is expected to close by March.
Fidelity also owns stakes in a range of companies from title insurer American National Financial Corp. in Irvine to Santa Barbara Restaurant Group in Santa Barbara and Micro General Corp., a Santa Ana information technology services company.
Last year, Foley stepped down as chief executive at one of his key investments, CKE Restaurants Inc. in Anaheim, which operates the Carl’s Jr. hamburger chain.
Byron Roth, chairman of Cruttenden Roth, said Foley approached him recently about buying back Fidelity’s stake. In addition to Fidelity’s desire to focus on core operations, both Roth and Foley conceded that the partnership between their companies had failed to live up to expectations.
When Fidelity bought the Cruttenden Roth stake from former chairman Walter Cruttenden III in April 1998, Foley was busy building a diverse portfolio of stocks.
Foley had hoped the close ties with Cruttenden Roth, which specializes in equity offerings for small companies, would serve as a funnel for new investment opportunities for Fidelity.
“It was disappointing,” Foley said. “It didn’t deliver the kinds of transactions we were looking for.”
Foley also said he felt uncomfortable “being in the middle” of a lawsuit filed last year by Cruttenden Roth against its former chairman. The suit, which is pending, accuses Cruttenden of stealing clients and employees after he stepped down and launched a rival investment bank, E*Offering. Cruttenden has denied the accusations.
The sale puts all Cruttenden Roth stock in the hands of employees, with about 40% controlled by Roth. Roth said Fidelity will receive about about what it paid for the stock.
Fidelity investors seemed encouraged by the news. Shares in Fidelity rose 25 cents a share to $13.13 in New York Stock Exchange trading Tuesday.
