85.7 F
San Fernando
Thursday, Mar 28, 2024

Bid for 21st Century Creates Surprise, Some Complaints

The insurance behemoth American International Group Inc., which already owns 61.9 percent of the outstanding shares of Woodland Hills carrier 21st Century Insurance Group, is itching to buy the rest. New York City-based AIG last month inked a letter to the board of 21st asking to purchase the remaining shares for $690 million, or $19.75 a share in cash. The amount raised some eyebrows among those that follow the companies. Analyst Meyer Shields of Stifel Nicolaus in a report called the deal “very generous” since it valued the company’s worth at almost 20 times its estimated profit for 2007. “We’re still very surprised by the valuation,” Shields said later. “Given our negative expectations for California auto insurers in 2007, we frankly expected AIG to give the shares a chance to settle down before making a bid.” With that price, the buyout is not being ruled out completely 21st has created a special committee of legal counsel and financial advisors to weigh the bid. AIG’s stake in 21st has also been widely seen as more of an investment versus any desire by AIG to operate it. The company, which is part of the Dow Jones Industrial Average, has the purse strings: its 2005 income totaled $10.4 billion. However, some 21st shareholders aren’t leaping for joy they’re suing AIG claiming the company is trying to “squeeze out” minority holders by not paying a fair price. The shareholders filed a lawsuit Jan. 26 in L.A. Superior Court trying to block the acquisition and hire “truly independent” advisors and committee members. The shareholders are seeking class action status and a decision is likely many months away. Officials with 21st Century did not return calls. Microsoft Cuts Felt at THQ After a solid holiday selling period and nine consecutive quarters of exceeding earnings estimates, Agoura Hills videogame maker THQ Inc. was dealt a blow last month when Microsoft announced it is slashing its shipments of Xbox 360 from 15 million to 12 million because of softening sales. Microsoft said the cuts were triggered by unsold inventories already in stores. Xbox 360 was launched in November 2005, but sales have leveled after the introduction of Sony’s PS3 and Wii by Nintendo late last year. As one of the largest videogame makers, THQ is especially vulnerable to the cuts and the street reacted accordingly its stock dropped 3 percent, or $0.97, to $30.76 on Jan. 26, the day of the announcement. But Todd Mitchell, an analyst for Kaufman Bros. who follows the company, said the drop is being felt industry wide, not just by THQ. “This is spread across the whole industry,” he said, adding later that THQ also offers games on a variety of counsels, not just Xbox. “They have a pretty diversified lineup. I don’t think it’s a huge factor.” The 1,600-employee company just last month regained compliance with Nasdaq’s continued listing requirements. The exchange warned THQ last fall that it could be delisted due to filing irregularities. A Soft Landing for Ryland? Year and quarterly results reported by Calabasas homebuilder The Ryland Group Inc. last month were chock full of surprises mainly that they weren’t as bad as many thought. Many had predicted the home building market would be dealt a deathblow because of stagnant sales and skyrocketing material costs. (The Commerce Department just last month reported sales of new homes in 2006 decreased a stunning 17.3 percent, the largest amount in 16 years.) But for Ryland, the company actually thumped analyst expectations that predicted a 25 percent decrease in revenues and 44 percent earnings decline. Decreases came in at 11 percent and earnings were down 40 percent, the result of home prices increasing slightly from $295,000 last quarter to $298,000. Briefly Calabasas-based mortgage lender Countrywide Financial Corp. is said to be in talks with Bank of America about some type of relationship. Speculation over a possible merger has been good to Countrywide’s stock, but many analysts are questioning if a takeover could ever gain traction. BofA has been clear it has no plans about getting into the mortgage industry even though government regulations block it from purchasing another large U.S. financial institution. “We doubt that Bank of America would purchase Countrywide,” Michael Mayo, an analyst for Prudential Equity Group, wrote in a letter to investors. St. Jude Medical Inc., the largest medical device maker in the Valley, said it plans to buy back up to $700 million of its common stock by the end of the month at below market prices of $50 per diluted share. The company, based in St. Paul, Minn., said in a SEC filing it will complete up to $1 billion in common stock repurchases before May. St. Jude had 1,893 Valley employees in 2006. Staff Reporter Chris Coates can be reached at (818) 316-3124 or at [email protected] .

Featured Articles

Related Articles