22 May 2018Insurance

Icahn sues AmTrust CEO, Karfunkel family over go-private deal

Activist investor Carl Icahn filed a lawsuit against AmTrust Financial Services and the family that controls the company, accusing them of trying to take the insurer private at the wrong time and at the wrong price, according to a Reuters May 21 report.

The lawsuit filed in the Court of Delaware accuses Karfunkel-Zyskind family of engaging in a transaction which will transfer "huge amounts of value" belonging to the company’s public stockholders to the controlling family.

Stone Point Capital, the Karfunkel Family, and AmTrust CEO Barry Zyskind are in the process of acquiring AmTrust in a transaction valued at approximately $2.7 billion with a view of taking AmTrust private. Evergreen Parent, an entity formed by private equity funds managed by Stone Point Capital will acquire the approximately 45 percent of the company's issued and outstanding common shares that the Karfunkel-Zyskind family and certain of its affiliates and related parties do not presently own or control.

Icahn reportedly argued that the going-private deal unfairly benefits the controlling Karfunkel family at the expense of public stockholders. He asked a Delaware Chancery Court judge to hold Amtrust directors who backed the deal liable for not acting in the best interests of holders, according to the lawsuit.

Icahn recently disclosed a 9.38 percent stake in insurer AmTrust and said in a letter to the insurer’s board that he strongly opposed the going-private deal. Icahn expressed his “strong opposition to and intention to vote against” the proposed merger by and among Evergreen Parent.

Czech-based Arca Capital, which own 2.4 percent of total outstanding shares of AmTrust, said it plans to work with Carl Icahn and other minority shareholders in opposing the proposed privatization transaction, according to Reuters.

In response to the Icahn move, Zyskind said in a letter distributed to employees of AmTrust that “we are making great progress towards completing the transaction, which we continue to expect to occur in the second half of 2018.

“As we outlined in March, we believe the proposed transaction delivers immediate and certain value for public shareholders at a significant premium and is in their best interest. We have heard positive feedback from shareholders who agree, and over the coming weeks, we will continue to communicate with all shareholders about the substantial value that this transaction will deliver.

“As we continue to work toward completing the transaction, it remains business as usual for all of us at AmTrust. We are committed to keeping you updated on important developments as we move toward the closing. We ask that you continue to do what you do best and provide the exceptional service and support that our policyholders, brokers, agents and partners have come to expect,” Zyskind said.

Zyskind had previously argued that as a private enterprise AmTrust will be able to focus on long-term decisions, without the emphasis on short-term results.

AmTrust wants to address financial controls as well as pricing and reserve adequacy issues.

The firm, which specializes in coverage for small businesses, reported a net loss of $348.9 million for  2017 after a net profit of $430.4 million in 2016.

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More on this story

23 May 2018   Taking into consideration a Deutsche Bank valuation of AmTrust Financial Services, the insurer’s shares should be worth between $26.06 and $31.86, and not the $13.50 that is being offered to take the company private, billionaire investor Carl Icahn argued in a May 23 presentation.
30 May 2018   Advisory firm Egan-Jones has joined Glass Lewis in recommending that AmTrust Financial Services stockholders vote "FOR" the company's merger agreement at the special meeting of stockholders on June 4, 2018.
31 May 2018   AmTrust Financial Services has informed shareholders that "a representative of the company will count the votes and act as an inspector of election" at the company's special meeting next week, which means that the company will act as judge and jury of the shareholder vote on June 4, according to activist investor Carl Icahn.