No Deal: Fidelity Calls off LandAmerica Merger

Fidelity National Financial, Inc. (FNF) said very late Friday after market close that it had chosen to terminate its merger agreement with troubled title insurance conglomerate LandAmerica Financial Group, Inc. (LFG), citing a “contractual due diligence termination right.” The merger agreement gave Fidelity sole discretion to terminate the merger on or before Nov. 21, after first announcing the pending deal on Nov. 7. Neither firm would comment on the failed merger agreement beyond the fact that the merger had been called off. But the terms of the deal, along with Friday’s closing share prices, meant that Fidelity would have paid nearly a 70 percent premium to acquire LandAm’s business; Fidelity was to exchange .993 of its shares for each LandAmerica share. We’re guessing, based on the above, that there wasn’t enough on LandAm’s books to justify that sort of premium. “We are disappointed with Fidelity’s decision,” said LandAm CEO Theodore Chandler, “however, our attention remains focused on strengthening LandAmerica’s business and exploring strategic alternatives during these incredibly difficult economic times.” See the company’s press statement. That LandAm would have agreed in the first place to let a direct competitor review its books and operations with an apparently unencumbered right to terminate the deal, however, likely suggests the sort of dire situation now facing the firm. “Nobody gives a free look unless they have little other choice,” said one source, an M&A consultant in the mortgage industry that asked not to be named. “Fidelity had no incentive to try to find a way to work the deal, and there were probably some pretty scary ghosts that bounced up in the due diligence process. There always are.” The consultant suggested that had such tie-ins existed, Fidelity might have been motivated to renegotiate its purchase rather than look at the massive premium to acquire the firm. He also suggested that the termination of the deal doesn’t preclude further talks, as well. Weak mortgage-related activity drove a third quarter net loss of $599.6 million, or $39.45 per share, at LandAmerica; that total included $462 in goodwill and other non-cash write-offs. Total revenue decreased by 30.3 percent, and direct revenue from title and non-title commercial operations declined by 40.1 percent — in other words, it was a pretty bad quarter. When the merger was originally announced, LandAm’s Chandler said that “it has become increasingly difficult for LandAmerica to remain an independent public company.” Now, as a jilted bride and still an independent public company, some tough questions are likely to be asked about the company’s near-term ability to remain as such. Write to Paul Jackson at

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