Fidelity National Acquires LandAmerica for $128M

Under the terms of the merger agreement, LandAmerica shareholders will receive 0.993 shares of Fidelity's common stock. The transaction has been structured so it will reduce the combined debt of both companies by approximately $250 million; essentially, Fidelity's title insurance subsidiaries will provide liquidity equal to the statutory book value of LandAmerica's two primary title insurance subsidiaries--Commonwealth Land Title Insurance Co. and Lawyers Title Insurance Corp.--prior to the closing of the merger. The proceeds will then be used to repay LandAmerica's revolving credit facility and private placement senior notes and, potentially, existing Fidelity debt. The end result of this structure, Fidelity expects, is a total capitalization debt ratio that will remain at 30%.

The merger, once finalized, will represent a significant consolidation in the title insurance industry, Daniel Kennedy Murphy, SVP and Treasurer of Fidelity National Financial, acknowledged on a telephone conference with investors and analysts this morning. "It will need antitrust and regulator approval," he said--but added the companies are not anticipating any problems in this area.

Once complete, he said, the merger "will represent a tremendous opportunity for Fidelity National." Fidelity National Financial also has a due diligence contingency period for the deal, which will expire Nov. 21.

Theodore L. Chandler, Jr., LandAmerica's Chairman and CEO, will join Fidelity National's Board of Directors as vice chairman after the transaction closes. It was the unprecedented credit freeze and depressed real estate market that propelled LandAmerica to this move, Chandler says in a prepared statement. The business environment had deteriorated "to the point that it [had] become increasingly difficult for LandAmerica to remain an independent public company," he says. The two companies preliminarily estimate that they will realize at least $150 million in operational cost synergies by combining operations.