But now it's on much better terms for Fidelity. The skinny? LandAm apparently had a toxic exchange subsidiary that invested about $290 million in auction rate securities that may take forever to get rid of. And you need to access that money to faciliate the exchanges. In short? Liquidity crisis.
So the solution? File Chapter 11 and sell the money making parts of the company, Lawyers Title and Commonwealth, to Fidelity. This of course assumes the deal gets past regulatory approvals, and I think it will. So FNF gets the cake without having to eat the poisonous part of the business.
As an agent of these companies, I see this as a good thing as we will have the backing of the 800 pound gorilla in writing policies. I don't know, however, how this might affect (a) day to day operations (I am told not really), and (b) current employees in direct operations at Lawyers and Commonwealth. We are being told the local level relationships will not change.
UPDATE: The full text of the press release can be seen here.
Under the terms of the stock purchase agreement, Chicago Title Insurance Company will acquire Commonwealth for $158.6 million and Fidelity National Title Insurance Company will acquire Lawyers and United for $139.4 million, for a total purchase price of $298.0 million. The transaction anticipates that LFG will file Chapter 11 proceedings and is subject to certain closing conditions and regulatory approvals, including the entry of final approved orders by the Chapter 11 court, Hart Scott Rodino approval and the receipt of Form A approvals from applicable state insurance regulators. Closing is expected to take place as early as late December 2008.The market really likes this deal so far, as FNF shares are up over 20% as type. What's there not to like?
"The acquisition of these established title insurance franchises is an exciting opportunity for FNF," said Chairman William P. Foley, II. "We have always had great respect for the Commonwealth, Lawyers and United commercial and residential operations and all three underwriters will emerge from the LFG bankruptcy proceedings as much stronger, stable and more valuable companies. To the extent that it is legally permissible, we expect to immediately begin meeting with the Commonwealth, Lawyers and United managers, employees, agents and customers throughout the country to ensure a smooth transition after closing, as we welcome these underwriters and their employees, agents and customers into the FNF title insurance family."