Lauderdale Lakes, Fla.-based 21st Century Holding Co. said its board of directors has unanimously rejected an unsolicited buyout proposal by Florida-only insurer Homeowners Choice, Inc., which sought to acquire all outstanding shares of 21st Century for approximately $5.30 per share or about $40 million.
21st Century Holding said the Oct. 12 offer from Homeowners Choice Chairman Paresh Patel “is wholly inadequate and not in the best interest of the company’s shareholders.”
Bruce Simberg, chairman of the board of directors of 21st Century Holding, dismissed the offer as “simply an opportunistic attempt to acquire 21st Century’s valuable licenses and portfolio and enhance Homeowners Choice’s balance sheet at the expense of 21st Century’s shareholders.”
Simberg said the proposal substantially undervalues the assets and earnings potential of 21st Century.
“The proposal does not take into account the premium growth initiatives that the company has already started to implement, including our recently announced premium rate increases, our continued multi-state diversification into additional lines of insurance, and our improved investment portfolio management, which we expect will result in sustainable future profits,” Simberg said.
The board of directors concluded that the Homeowners Choice proposal “fails to be competitive with the strategic plan and initiatives the company has developed to generate significant growth in top-line revenue and bottom-line net income, which it believes will increase value for the company’s shareholders.”
21st Century said it has received approval from the Florida Office of Insurance Regulation to assume up to 45,000 additional policies from state-backed Citizens Property Insurance Corp., up to as many as 15,000 during December.
It has also received approval for a 19 percent rate increase on some of its Florida home insurance business.
The board of directors also approved a stock repurchase program of up to $4 million worth of the company’s common stock.
In his letter to Homeowners Choice’s Patel turning down his offer, Simberg noted that while 21st Century is multi-state and growing, his impression of Homeowners Choice is “quite” different.
“Homeowners Choice is only writing property and casualty insurance in the state of Florida. Homeowners Choice, as only a two-year old company, is untested against an active wind season in Florida. Combining with Homeowners Choice would be a strategic step backwards for 21st Century, which has been and continues to diversify its business lines and geographic markets,” Simberg told Patel in the letter.
He wrote that while it “may be beneficial for Homeowners Choice shareholders for the company to cheaply acquire 21st Century’s licenses for auto and general liability insurance and licenses to write business in states outside of Florida, the combination does not add strategic value or diversification for 21st Century shareholders.”
He said his board has no interest in further discussions with Homeowners Choice at this time.
Source: 21st Century Holding
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