Title insurer Land America booms on Fidelity National offer

Fidelity National Financial Inc, one of the largest U.S. title insurers, decided to buy smaller rival LandAmerica for about $126 million in stock as the title insurers look for  consolidate even in  an industry slump triggered by a worsening housing crisis.

LandAmerica shares, down by heavy losses in the recent past, soared as much as 104 percent Friday, to trade at an important premium to the price offered by Fidelity.

Fidelity National shares rose as much as 33 percent.

"They are taking out the third-biggest competitor in the industry basically for the price of its debt, a very inexpensive trade for Fidelity..," RBC Capital Markets analyst Mark Dwelle told Reuters.

Fidelity National will continue paying its current dividend of 60 cents a share annually through 2009, a company official said in a conference call with analysts.

The company expects the deal to close by March 31, 2009, it said in the call.

"There is nothing from a financing standpoint and approval standpoint that I think could be a serious roadblock," Dwelle said, but added gaining regulatory approval for so much of market share will be minor issue for the companies.

Shareholders benefited

Shareholders of LandAmerica Financial Group, the No.3 title insurer, will receive 0.993 shares of Fidelity common stock for each share held, the companies said in a statement.

The deal represents a premium of about 74.5 percent based on Land America’s closing price of $4.75 on Thursday. LandAmerica had 15.2 million outstanding shares as of July 30, 2008.

"The unprecedented credit freeze and depressed real estate market have negatively impacted our business to the point that it has become increasingly difficult for LandAmerica to remain an independent public company," LandAmerica's Chief Executive Theodore Chandler said.

As LandAmerica shares were trading around $8 just two days back, the premium will likely see the difference between that and the new offered price, Dwelle said.

Glen Allen, Virginia-based LandAmerica on Wednesday postponed the release of its third-quarter results sending its shares down as much as 35 percent on Thursday.

For Fidelity, investors quite liked the value of the deal that they managed, he added.