Lauderdale Lakes, Fla.-based 21st Century Holding, which offers homeowners, flood and auto insurance in Florida, as well as coverage in other states, said after careful consultation with its financial advisors and legal council, its board of directors decided Homeowners Choice’s offer “is wholly inadequate and not in the best interest of the company’s shareholders,” according to a statement.
Earlier this month, Homeowners Choice, a Clearwater, Fla.-based property-casualty insurer, expressed its interest to acquire all outstanding shares of 21st Century common stock for about $5.30 per share in cash and stock. The deal would have been worth $42.5 million, according to published reports.
In a statement, the insurer’s board chairman, Paresh Patel, said the combination of the two firms would “create a premier Florida-based insurance company” benefiting everyone “while creating an entity stronger and better able to pursue growth.”
Exactly 16 days after that offer, 21st Century Holding said it disagreed.
Bruce Simberg, chairman of the insurer’s board of directors, said Homeowners Choice’s proposal “substantially undervalues the assets and earnings potential of 21st Century,” in a statement.
“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.
He also noted that 21st Century Holding received approval from the Florida Office of Insurance Regulation to assume up to 45,000 policies from Citizens Property Insurance Corporation – the state’s homeowners’ insurer of last resort – with no more than 15,000 policies during the month of December.
“We strongly believe that our standalone strategic plan offers greater value for our shareholders,” Simberg said.
21st Century Holding also announced that its board of directors has unanimously approved a stock repurchasing program, authorizing the purchase of up to $4 million worth of the company’s common stock.
Michael H. Braun, 21st Century Holding’s CEO, said that announcement “delivers significant value to shareholders and demonstrates the Board’s confidence in the company’s future performance.
“We are facing a difficult economic environment that is affecting the industry as a whole,” Braun said. “21st Century, despite improved gross written premium and improved investment income and gains, still faces some challenges that will affect profitability in the near-term due to reinsurance costs and wind mitigation credits. While 21st Century will not report profits in the 3rd or 4th quarters of 2009, we anticipate returning to profitability thereafter. We believe that pursuing 21st Century’s existing strategic growth plan will enable our shareholders to realize the inherent value of the company.”