Sardar Biglari, Chairman and CEO of Biglari Holdings, aspires to copy billionaire Warren Buffett’s strategy of buying into an insurance company and perform the wonders with the insurance premiums that the company brings in. However, his plan to acquire insurance company Fremont Michigan InsuraCorp Inc. (FMMH, Financial) just had set back today.
Today, Fremont Michigan announced that it has entered an definitive agreement with to merger with Auto Club Insurance Association (ACIA, Financial). Under the terms of the agreement, Auto Club Insurance will acquire all of the outstanding shares of Fremont for $36.15 per share in cash, for an aggregate purchase price of approximately $67.7 million. The $36.15 per share purchase price represents a premium of approximately 35% over the $26.75 per share closing price of Fremont Michigan on April 15, 2011, the last trading day prior to today's announcement. The purchase price equals approximately 1.4 times the GAAP book value of Fremont at Dec. 31, 2010.
Although we do not know that the final outcome of the merger yet as it is scheduled to close till 3Q11. As an investor who likes to buy stocks at cheap, Biglari is not likely to raise the bid.
It is not a complete failure for Biglari. If the deal between Fremont Michigan and Auto Club Insurance closes as scheduled, Biglari stands to win handsomely with his 9.9% stake in the company. Investors who followed Biglari into investing in Fremont Michigan now have a choice to sell the stock at 4% discount to the Auto Club Insurance offer or wait till the third quarter for the full price. Either way, it has been a good trade for the investors.
The question is, who will be Biglari’s next acquisition target?
Today, Fremont Michigan announced that it has entered an definitive agreement with to merger with Auto Club Insurance Association (ACIA, Financial). Under the terms of the agreement, Auto Club Insurance will acquire all of the outstanding shares of Fremont for $36.15 per share in cash, for an aggregate purchase price of approximately $67.7 million. The $36.15 per share purchase price represents a premium of approximately 35% over the $26.75 per share closing price of Fremont Michigan on April 15, 2011, the last trading day prior to today's announcement. The purchase price equals approximately 1.4 times the GAAP book value of Fremont at Dec. 31, 2010.
Although we do not know that the final outcome of the merger yet as it is scheduled to close till 3Q11. As an investor who likes to buy stocks at cheap, Biglari is not likely to raise the bid.
It is not a complete failure for Biglari. If the deal between Fremont Michigan and Auto Club Insurance closes as scheduled, Biglari stands to win handsomely with his 9.9% stake in the company. Investors who followed Biglari into investing in Fremont Michigan now have a choice to sell the stock at 4% discount to the Auto Club Insurance offer or wait till the third quarter for the full price. Either way, it has been a good trade for the investors.
The question is, who will be Biglari’s next acquisition target?
