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Fidelity National Set to Close on LandAmerica Units After Antitrust Clearance

December 23, 2008

Fidelity National Financial Inc. is set to become the largest U.S. writer of title insurance, as it closes its acquisition of former LandAmerica Financial Group Inc. subsidiaries Commonwealth Land Title Insurance Co. and Lawyers Title Insurance Corp.

Fidelity, which had set a Dec. 22 deadline to close on the $281.8 million deal, cleared the last major hurdle at midnight Dec. 19, when the Federal Trade Commission's waiting period to challenge the deal under the Hart Scott Rodino Antitrust Improvements Act expired. All that remains is for the units to be formally released from receivership by the Nebraska Department of Insurance, which Insurance Director Ann Frohman has indicated she is prepared to do.

The deal would jump Fidelity over First American Corp. to become the largest player in the already highly consolidated title insurance market. According to data compiled by the American Land Title Association, Fidelity wrote 26.9% of the $8.06 billion of title insurance written in the first half of 2008, compared with 28.8% for First American. LandAmerica, the third-largest writer of the coverage before declaring Chapter 11 bankruptcy last month, wrote 19%.

The addition of Commonwealth and Lawyers ? along with the smaller LandAmerica unit United Capital Title Insurance Co., which Fidelity is also acquiring ? would give the company 43.7% market share, based on ALTA's first half data. Stewart Information Services, which also made a bid to purchase the LandAmerica units, would now be the third-largest writer, with 11.9%.

Nebraska's insurance department gave clearance Dec. 15 both to Fidelity's bid and to the competing $256 million offer from Stewart subsidiary Stewart Title Guaranty Co., approving Form A filings from both companies. However, only Fidelity's bid was considered by the U.S. Bankruptcy Court in Richmond, which approved the proposed takeover Dec. 16 during a hearing on LandAmerica's Chapter 11 filing.

"Due to developments subsequent to the Virginia bankruptcy court ruling and prior to the FTC deadline, Stewart has decided to no longer pursue the acquisition of the subsidiaries," Stewart said in a statement.

The Fidelity offer calls for the company to contribute $181,762,521 in cash, a $50 million subordinated promissory note due in 2013 and paying interest at 100 basis points above the five-year Treasury note, and $50 million in Fidelity shares priced at no less than $14 a share. United Capital Title will be purchased separately for the statutory book value at the time of the closing, which was $16 million at the end of the third quarter.

FNF posted a $198.3 million net loss in the third quarter, compared with $6.5 million of net income a year earlier, as it strengthened reserves by $261.6 million, took $42 million in realized investment losses and paid $12.5 million in accelerated lease expenses related to closing title and escrow offices.

LandAmerica widened its own quarterly loss from $20.8 million in 2007 to $599.6 million in the most recent quarter, largely on a $462 million write-down of goodwill, other intangible assets, certain investments and deferred tax assets. The company also took a $90 million reserve-strengthening charge and $12 million of exit and termination charges.

Fidelity National Financial Group currently has a Best's Financial Strength Rating of A (Excellent).

Source: Fidelity National Financial Inc.



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