One of LandAmerica Financial Group Inc.’s biggest shareholders says the title insurer’s larger rivals are interested in acquiring it and that “the likelihood of consummating such a deal is high” if the company were to go along.
In a letter urging LandAmerica’s board of directors to explore the sale of the company, Viking Global Performance LLC claims the synergies resulting from a merger with a larger competitor could exceed $200 million, doubling earnings per share. Viking is an investment firm that owns nearly 8 percent of LandAmerica’s outstanding shares.
Viking said it has “generally been pleased with management’s execution” in the two years it has been a shareholder. The letter singled out a cost-cutting program, “Project Fusion,” and the centralization of LandAmerica’s title insurance subsidiaries to Nebraska as moves that “substantially improved shareholder returns.”
LandAmerica issues title insurance policies through three principal title underwriting subsidiaries — Commonwealth Land Title Insurance Co., Lawyers Title Insurance Corp., and Transnation Title Insurance Co. The subsidiaries share a single back-office processing center, and market from separate storefronts under different operating names.
Introduced in 2006, LandAmerica’s Project Fusion initiative seeks to reduce more than 300 technology applications to 50 or less during the next two years. While savings from Project Fusion are projected to amount to $35 million by 2009, that’s a fraction of the synergies that could be achieved through a sale of the company, Viking said.
“Based on previous large-scale acquisitions in the title insurance industry, we believe that an acquisition of LandAmerica by one of its larger competitors would result in synergies approximating $6 to $7 per LandAmerica share, thereby nearly doubling its earnings per share,” Viking’s letter said.
LandAmerica included the letter as part of a Securities and Exchange Commission filing today. LandAmerica spokeswoman Lloyd Osgood called Viking’s letter “a speculative statement” and said the company has a “longstanding practice to refrain from any comment on hypothetical industry consolidation.”
In its latest annual report to shareholders, LandAmerica said provisions in the company’s articles of incorporation and bylaws “may make it difficult for another company to acquire us and for shareholders to receive any related takeover premium for our common stock.”
A vote of at least 80 percent of outstanding shares is required for the approval of a merger or consolidation, sale, or exchange of substantially all the company’s assets to any shareholder that directly or indirectly owns or controls 10 percent or more of the voting power.
Other provisions to guard against a takeover include staggered elections of board members, the absence of cumulative voting in the election of directors, and the removal of directors only for cause and only with the approval of the holders of at least 80 percent of the outstanding shares entitled to vote.
In addition, LandAmerica’s board is authorized to issue up to 4.8 million shares of preferred stock without further approval by shareholders. Through its investors, Viking controls 1.35 million LandAmerica shares.
LandAmerica and its four principal competitors — Fidelity National Financial Inc., The First American Corp., Stewart Information Services Inc., and Old Republic International Corp. — accounted for 92 percent of the title insurance underwriting market in 2005.
In 2006, LandAmerica acquired United Capital Title Insurance Co., a subsidiary of Capital Title. LandAmerica also owns Commonwealth Land Title Insurance Co. of New Jersey, Land Title Insurance Co., and Title Insurance Co. of America, and owns all or part of dozens of other subsidiaries.
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