Shares of LandAmerica Financial Group. Inc., the nation's third largest title insurance and settlement company, tumbled more than 88 percent Monday in the wake of a terminated $130 million merger plan.
The Richmond, Va.-based company's share price dropped on the first day of trading since Fidelity National Financial Inc. of Jacksonville, Fla., canceled its plan to acquire LandAmerica, which employs about 500 in Western Pennsylvania,
LandAmerica's stocks closed at 51 cents, down $3.83, or 88.25 percent.
Fidelity's shares rose 13 percent, gaining 96 cents to close at $8.35. It also has operations in the Pittsburgh area, employing about 1,000 here.
The merger agreement, announced Nov. 7, was subject to completion of a financial review. Fidelity National had until Nov. 21 to make a final decision and announced its decision to pull out late Friday.
Fidelity National, the No. 2 title insurer, said it canceled plans to buy LandAmerica "pursuant to its contractual due diligence right."
Together, they employ about 26,500 people nationwide, including their estimated 1,500 workers in Allegheny, Beaver and Washington counties.
"Based on what was reported, this doesn't sound good for LandAmerica," said Jeff Schurman, executive director of Title Appraisal Vendor Management Association, a title industry trade group in Moon. "Fidelity had an opportunity to look at their books and found something they didn't like."
Officials of the two companies could not be reached for comment.
LandAmerica CEO Theodore L. Chandler Jr. said in a statement: "We are disappointed with Fidelity's decision. However, our attention remains focused on strengthening LandAmerica's business and exploring strategic alternatives during these incredibly difficult economic times."
LandAmerica said earlier this month it was forced to sell to Fidelity after losses from the decline in housing sales jeopardized its independence. LandAmerica posted four straight quarterly losses.
Fitch Ratings yesterday lowered its ratings on LandAmerica's financial strength three notches to BB from BBB+, moving the company from "secure" to "vulnerable." LandAmerica "faces serious liquidity constraints now that the acquisition plans have fallen through," Fitch wrote.
Chicago Title, a subsidiary of Fidelity National, was going to set up a $30 million credit facility to make sure LandAmerica had access to enough short-term cash. That's not going to happen now.
Without a new acquisition agreement, some $250 million of borrowed money would be due immediately, Fitch said. LandAmerica can't access the $50 million remaining under its bank line of credit, the rating agency added.
Fidelity National's Service Link unit, with offices in Hopewell, Beaver County, and in Moon, together employ well over 500. Its LSI unit in Coraopolis employs about 500.
LandAmerica's Nationwide Appraisal & Title Services in Washington, Pa., employs about 400, and its Lenders Services unit in Moon employs about 100.
The nation's top three title insurers, including First American Corp. in Santa Ana, Calif., cut more than 12,000 jobs from the beginning of 2007 to the middle of this year as sales declined, reducing demand for coverage. Title insurers use their databases and public records to verify that a seller is the home's true owner and the property is free from liens.
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