Business Context and Reporting Period
This Form 8-K, dated November 7, 2008, reports that Fidelity National Financial, Inc. (FNF) entered into an Agreement and Plan of Merger with LandAmerica Financial Group, Inc. (LFG). Under the agreement, a wholly-owned FNF subsidiary will merge with LFG, with LFG surviving as a subsidiary of FNF. The transaction is expected to be tax-free.
Key Financial Metrics and Transaction Terms
- Exchange Ratio: All outstanding LFG shares will be converted into the right to receive 0.993 share of FNF common stock.
- Termination Fee: LFG may be required to pay FNF a termination fee of $7.5 million under specified circumstances involving a change of board recommendation or competing proposals.
- Liquidity Support: Chicago Title Insurance Company (an FNF subsidiary) agreed to provide a $30 million stand-by secured credit facility to LFG.
- Collateral: LandAmerica 1031 Exchange Services, Inc. pledged approximately $155 million par value of auction rate securities to guarantee LFG's obligations under the credit facility.
- Interest Rate: Amounts drawn under the credit facility will bear interest at LIBOR + 4%.
- Debt Repayment: The merger is subject to regulatory approvals for a $250 million loan or dividend from FNF title subsidiaries to repay debt of FNF or LFG.
Note: This filing does not provide specific revenue, profit, cash flow, or margin figures for either company.
Material Changes and Conditions
The merger is subject to several material conditions, including:
- Approval by LFG stockholders.
- Expiration or termination of the Hart-Scott-Rodino waiting period.
- Divestiture by LFG of Centennial Bank, a California industrial bank.
- Approval of certain LFG lenders.
- Regulatory approvals for the $250 million loan/dividend.
- A due diligence termination right for FNF expiring on November 21, 2008.
Outlook, Risks, and Management Commentary
Management anticipates that Theodore L. Chandler, Jr., LFG's Chairman and CEO, will join FNF's Board of Directors as Vice Chairman post-closing. The filing includes significant forward-looking statements regarding the transaction's completion and expected synergies.
Key Risks Identified:
- Failure to secure necessary regulatory approvals or shareholder approval.
- Unexpected delays in obtaining approvals.
- Failure to realize expected revenues, cost savings, or synergies.
- Adverse changes in real estate activity, interest rates, or the U.S. economy.
- Difficulties in integrating acquisitions.
Investor Verification Checklist
- Verify the status of the $155 million in auction rate securities pledged as collateral, given market liquidity concerns in 2008.
- Confirm the timeline for the divestiture of Centennial Bank.
- Monitor the outcome of the FNF due diligence review period ending November 21, 2008.
- Review the upcoming Form S-4 proxy statement/prospectus for detailed financial data and risk factors.
- Track regulatory approval status for the $250 million inter-company loan/dividend.