T. Rowe Price Opposed to Buyout of Ohio Insurance Company
A major shareholder of an Ohio-based insurance company is opposing a proposed buyout of the firm, citing concerns over the deal process and further fueling a takeover battle that has divided a boardroom in recent weeks.
T. Rowe Price Group Inc. TROW -0.94% said in a filing it won't sell its shares into a $30-a-share bid from National Interstate Corp.'s NATL +0.70% parent company, American Financial Group Inc., AFG +0.04% which is seeking to buy the 48% of National Interstate it doesn't already own.
T. Rowe, which owns 8% of National Interstate, criticized the conduct of six National Interstate board members with ties to American Financial. Those directors, who make up a majority of National Interstate's 10-person board, didn't recuse themselves from discussions about the deal and declined to let four independent directors alone evaluate the bid, according to earlier regulatory filings.
Special committees, while not legally required, are commonly used to manage conflicts that can arise when majority shareholders offer to cash out minority investors.
"[W]e have rarely come away with concerns as substantial as those we have identified here," T. Rowe said in a securities filing, adding that the process shows "lapses in basic standards of corporate governance."
A spokeswoman for American Financial declined to comment. A spokesman for National Interstate didn't return calls seeking comment.
T. Rowe's opposition comes after the rift in National Interstate's boardroom became public last week. The takeover battle pits four independent directors, led by the company's founder and former chairman, against six directors with ties to the buyer, including National Interstate's chief executive.
Alan Spachman, who founded National Interstate in 1989, last week called the bid a "brazen attempt to coerce people to sell stock at a bad price, using a bad process, overseen by directors who are hopelessly conflicted."
American Financial, which already owns 52% of National Interstate's shares, needs two-thirds to close the deal. Together, T. Rowe and Mr. Spachman control about 20%, which means American Financial needs more than half of the remaining shares to sell into its offer, which values National Interstate at about $590 million.
In its filing, T. Rowe said it was "particularly appalled" that no bankers have determined the bid is fair. National Interstate's financial adviser, Duff & Phelps LLC, said an initial $28-a-share bid was too low, then resigned last week after a board meeting in which National Interstate Chairman Joseph Consolino — who is also American Financial's finance chief — raised the bid to $30 and asked the bank to reconsider, according to regulatory filings and interviews with some of the independent directors.
The board, split six-to-four, said last week it would officially remain neutral on whether shareholders should accept American Financial's offer, which expires March 6.
This isn't the first time T. Rowe has bared its teeth in a merger fight. It publicly opposed the buyout of Dell Inc. last year, opposition that helped rally wider shareholder backlash and led to Dell's buyers raising their price.
Earlier this year, T. Rowe sent a letter confidentially to the board of Time Warner Cable Inc., TWC -0.63% urging it to consider a takeover proposal from Charter Communications Inc. that it had been resisting, according to a person familiar with the matter. Time Warner Cable later struck a $45 billion deal to merge with Comcast Corp.
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