Insurance Underwriter - Mergers and Acquisitions
Homeowners Choice drops unsolicited effort to buy 21st Century Holding
November 04, 2009 7:30 PM ET
By Samuel Spies
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Homeowners Choice Inc. on Nov. 4 said it has ended efforts to acquire 21st Century Holding Co., at least for the time being. In a news release, Homeowners Choice did not rule out the possibility of a future hostile takeover bid but said the company was not at this time considering such a move. 21st Century had already rejected the unsolicited proposal of $1 in cash and 0.5 of a share in Homeowners Choice for each of its shares of common stock. Based on Oct. 9 closing prices, Homeowners Choice calculated the proposal valued 21st Century at $5.30 per share, a premium of about 36%, but the proposal expired Nov. 2. In the news release, Homeowners Choice Chairman Paresh Patel said 21st Century's business lines and geographic markets were valuable, but the company had "struggled" to manage them. "According to 21st Century Chief Executive Officer Michael Braun, 21st Century will not be profitable during the third and fourth quarters of 2009," Patel's statement said. "That means 21st Century will report losses in four out of six quarters. "Mr. Braun blames these losses on the economic environment, reinsurance costs and wind mitigation credits. We of course sympathize with 21st Century since we face that same economic environment and the same challenges of reinsurance costs and wind mitigation credits. However, Homeowners Choice has been profitable for eight consecutive quarters," Patel said. The chairman added that he expects Homeowners Choice will be profitable in the third and fourth quarters of 2009. Patel said Homeowners Choice believed it had offered a fair price. "The market is substantially discounting the assets of 21st Century, perhaps because of past performance of its management and concerns for its future prospects," he said. Patel said 21st Century never asked for a higher offer or held serious discussions with his company and that 21st Century has started a share repurchase program. In rejecting the proposal, 21st Century Chairman Bruce Simberg said Homeowners Choice was untested against an active Florida wind season. Patel said the company was prepared for wind and remained stayed profitable while some competitors reported losses or went out of business in the same conditions. Patel said Homeowners Choice will evaluate opportunities for organic growth or acquisitions as opportunities arise. | 
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