The Prague-based investment firm Arca Capital said it plans to work with activist investor Carl Icahn and other minority shareholders to prevent a proposed privatization of AmTrust Financial Services Inc.
Arca Capital owns approximately 2.4 percent of outstanding shares of AmTrust Financial.
Icahn recently disclosed that he has more than of 18 million shares of the company, equal to an approximately 9.4 percent stake. He also announced he opposes the insurer’s $2.7 billion privatization scheme.
“I am strongly against the proposed going-private transaction and intend to solicit proxies against the deal,” Icahn wrote in a letter to AmTrust’s board.
Arca Capital, which thinks the proposed privatization plan undervalues AmTrust, said it “has long held the view that AmTrust Financial Services is a fundamentally strong business and has questioned the justification for its decline of over 50 percent since January 2017.” During that 15 month period, the stock has declined from over $27 per share to under $13 per share even though, according to Arca, there has been “no significant changes” to the business.
In March, Stone Point Capital, the Karfunkel family and AmTrust’s CEO Barry Zyskind agreed to buy the company in a deal that valued the firm at about $2.7 billion. That offer was 10 percent above their original offer.
“While ordinary shareholders have lost retirement and college funds, Barry Zyskind and his in-laws are now trying to privatize the firm at what Arca believes is an absurdly low valuation,” the private equity firm said in a statement.
Arca started an advocacy campaign against the plan when it was first announced in March. The campaign has involved creating an organization, ProtectAmTrustInvestors.org.
Arca alleges that actions by Zyskind and his allies have undermined AmTrust. “Whether or not these actions were purposeful, the result was a significant stock devaluation that hurt ordinary investors but allowed the prospect of a cheap sale to the very same Barry Zyskind. At very minimum, AmTrust management took advantage of the uncertainty in the company’s situation and the unfavourable market conditions to attempt to take AmTrust private on the cheap,” said Pavol Krúpa, chairman of Arca Capital.
Krupa also welcomed the involvement of Icahn in the company.
“Arca Capital stands ready to work with Mr. Icahn to stop the privatization plan and implement his tried and true methods to increase shareholder value,” Krupa said.
AmTrust offers workers’ compensation, commercial automobile, general liability and extended service and warranty coverages.
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