Carrie Bay | 12.19.08

Fidelity National Financial Inc. has received the green light to purchase two underwriting subsidiaries from bankrupt title insurer LandAmerica Financial Group Inc. Federal antitrust regulators allowed the legal waiting period mandated under the Hart Scott Rodino Act to expire at midnight on Thursday without intervening in the deal, essentially clearing the way for Fidelity to acquire LandAmerica's Commonwealth Land Title Insurance Co. and Lawyers Title Insurance Corp. for about $282 million.

According to a Reuters report, analysts consider the purchase of the individual LandAmerica businesses to be a better deal for Fidelity National than its original plan to acquire the entire company. Fidelity had extended a $126 million offer to acquire the Virginia-based title insurer in November but then two weeks later, abruptly pulled out of the deal, which would have required Fidelity to also assume over $500 million of LandAmerica's debt.

Fidelity's retreat led the already faltering LandAmerica to file for bankruptcy in late November and agree to sell off its largest underwriting subsidiaries. LandAmerica's business was hit hard by weakening housing market conditions. The firm posted significant losses for several quarters and was forced to close approximately 420 offices and cut more than 5,200 jobs since the beginning of the housing downturn in 2007.

In a statement issued today, Fidelity National said it must still obtain a final approval order from the Nebraska Department of Insurance removing the two subsidiaries from bankruptcy receivership before the deal can be completed (both Commonwealth and Lawyers are registered in the state of Nebraska). However, for the most part that step is largely a formality, since Nebraska Insurance Commissioner Ann Frohman gave her approval for the sale on Monday.

Frohman also granted approval to a competing proposal by Houston, Texas-based Stewart Title Guaranty Co. to acquire the two LandAmerica units. But on Tuesday the Federal Bankruptcy Court of the Eastern District of Virginia bumped Stewart out of the mix by considering and approving only Fidelity’s offer.

Fidelity National said it expects to close the transaction for LandAmerica's Commonwealth Land Title Insurance and Lawyers Title Insurance by December 22.

Fidelity has also agreed to acquire a third LandAmerica underwriter, United Capital Title Insurance Co., for approximately $16 million. That transaction must still be approved by California regulators, but is expected to close in the first quarter of 2009.

The acquisitions will make Fidelity National the largest title insurer in the country, with approximately 45 percent market share.

In related news, several lawsuits have been brought against the also bankrupt LandAmerica 1031 Exchange Services Inc., an intermediary trust in which investors could place their money while they looked for other properties to buy as a legal means of deferring capital gains taxes. According to the Richmond Times-Dispatch, days before LandAmerica 1031 declared bankruptcy, the troubled business was still accepting money from customers. Now that money is tied up in the firm's bankruptcy proceedings and customer accounts have been frozen. As a result, allegations of fraud, misconduct. and breach of contract have been leveled against the business unit, the Richmond, Virginia newspaper said.