Mergers & Acquisitions

Fitch Places LandAmerica on Watch Positive Following Announced Acquisition by Fidelity National

  2008 NOV 24 - (VerticalNews.com) -- Fitch Ratings has placed the 'BBB+' Insurer Financial Strength (IFS) ratings of LandAmerica Financial Group's (LFG) insurance subsidiaries (see complete list of ratings below) and the 'BBB-' Issuer Default Rating (IDR) of LFG on Rating Watch Positive. Fitch's rating action follows Fidelity National Financial's (FNF) announced plans to acquire LFG in a stock transaction.

  The stock transaction is valued at approximately $128 million as LFG shareholders will receive 0.993 shares of FNF common stock for each LFG share. Financial leverage at FNF is expected to remain near 30% as FNF's operating subsidiaries are expected to provide cash to repay LFG debt prior to the close of the transaction.

  The structure of the transaction is intended to preserve the statutory capitalization at the insurance operating subsidiaries. Both LFG and FNF were downgraded by Fitch during 2008 following declines in risk-based capital ratios. Going forward, FNF will be expected to maintain statutory capitalization at all its insurance operating subsidiaries at a level consistent with the rating category. Consequently, reserve adequacy and dividend policies will be key rating issues for the combined entity.

  The combined market share of FNF and LFG would be 46%, but Fitch estimates a more likely run-rate range between 35% and 40%. Post merger, FNF will clearly have industry leading market share.

  The Positive Rating Watch reflects the likelihood that LFG's ratings would move to FNF's 'A-' financial strength following the acquisition. FNF has a due diligence period ending Nov. 21, 2008, and the acquisition would likely close late in the first quarter of 2009.

  Keywords: Fitch Ratings.

  This article was prepared by VerticalNews Mergers & Acquisitions editors from staff and other reports. Copyright 2008, VerticalNews Mergers & Acquisitions via VerticalNews.com.