By Liz Hoffman
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. said in a filing it won't sell its
shares into a $30-a-share bid from National Interstate Corp.'s
parent company, American Financial Group Inc., 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 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.
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., 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.
Write to Liz Hoffman at liz.hoffman@wsj.com
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