One of AmTrust Financial Services’ shareholders is lobbying state regulators to oppose the insurer’s move to go private.
“Make no mistake, privatization is bad for investors, bad for brokers, bad for taxpayers and bad for policyholders,” Arca Chairman Pavol Krupa said in prepared remarks. “Thus, we are meeting with regulators to urge them to act for the benefits of all their constituents and reject this transaction.”
Arca Capital, a private investment group based in Central Europe, said it either wants the privatization stopped, or a higher privatization price, up from the current $2.95 billion/$14.75 per share offer, which itself is higher than an earlier, revised $13.50 per share plan. The alternative, Arca said is a deal that will potentially harm policyholders because of insufficient public shareholder oversight. Arca said it owns about 2.4 percent of outstanding AmTrust shares.
Arca, in its Oct. 1 release challenging AmTrust’s privatization plan, cites previous controversies with regulators in California and New York where AmTrust’s reserves were at issue in terms of covering active policies. The firm argues that a non-public AmTrust will have even less accountability, and that keeping it public would help both shareholders and policyholders ensure that the company stays healthy and honorable.
“Arca Capital envisions AmTrust as a strong public enterprise that can generate returns for shareholders and provide policyholders with policies they can count on in the case of unfortunate events,” Krupa said.
AmTrust’s plan to privatize was first announced in January 2018, and Arca notes that it has successfully fought for two successive price increases from the original $12.25 share offer. By doing so, according to the firm’s statement, the action contributed to “unlocking hundreds of millions of dollars in additional shareholder value. Arca said that the $14.75 buyout price is “absurdly low” and wants the ultimate privatization price to land in the $25 to $35 range.
AmTrust’s privatization deal calls for it to be Acquired by Stone Point Capital, along with current AmTrust Chairman and CEO Barry Zyskind, and founders George Karfunkel and Leah Karfunkel. They will buy the 45 percent of the company’s shares that the Karfunkels and Zyskinds don’t presently own or control. (Zyskind is the brother-in-law of the Karfunkel brothers, who started the business). Plans call for closing the transaction sometime during the second half of 2018; shareholders approved the current, revised plan in late June.
Source: Arca Capital