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Basch Report
Jax Daily Record Thursday, Jun. 21, 201805:20 AM EST

The Basch Report: Starboard impacted Fidelity-Stewart deal

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Sale was sped up by activist investor attempting to elect members to Stewart’s board of directors.
by: Mark Basch Contributing Writer

With Starboard Value LP possibly pressuring Web.com Group Inc., it is worth noting that Starboard already had an impact on another major deal involving a Jacksonville-based company.

Before Fidelity National Financial Inc. agreed to buy Stewart Information Services Corp. for $1.2 billion, Starboard was pushing Stewart to make some kind of a deal.

Starboard, a well-known activist fund, revealed two weeks ago in a Securities and Exchange Commission filing it has acquired 9.4 percent of Web.com’s stock, prompting speculation that Starboard will be pressuring Web.com for some type of action.

Starboard had been invested in Stewart for at least two years and in October 2016, it reached an agreement that put three new independent directors on Stewart’s board.

However, the fund apparently wasn’t satisfied and in January 2018, Starboard indicated in another SEC filing that it would nominate three new directors to Stewart’s board at the company’s annual meeting.

Houston-based Stewart already was negotiating with Fidelity and several other parties about a possible buyout by then. Stewart’s proxy statement for the Fidelity deal, filed May 30, said it first contacted Fidelity in September 2017 and was talking to several other unnamed parties about a deal in the months after that.

Starboard’s attempt to nominate new directors sped up the process.

“In light of this development and the Stewart board’s view that a concurrent proxy contest was likely to substantially complicate any negotiations with other third parties, the Stewart board affirmed its desire to proceed expeditiously with the strategic alternatives process in order to conclude the process in advance of the timeline of any potential proxy solicitation pursued by Starboard in connection with electing such nominees at the annual meeting,” the proxy said.

Fidelity and Stewart agreed in March on the merger, a deal which would extend Fidelity’s share of the U.S. title insurance market from about 32 percent to 42 percent.

However, because of Fidelity’s dominant position in the title insurance market, it expects regulatory agencies to require divestitures of some operations before approving the deal. The merger agreement includes provisions that could reduce the price, depending on the amount of divestitures.

Fidelity said in an SEC filing it received a request May 31 from the U.S. Federal Trade Commission for additional information as it reviews the deal.

Because of the long regulatory process, Fidelity does not expect to complete the merger until the first half of 2019.

Starboard had 9.7 percent of Stewart’s stock when it threatened the proxy fight in January. A March SEC filing by Starboard indicated it sold off most of its shares after the Fidelity deal was announced.

Other than buying shares, Starboard has not announced any action regarding Web.com.

Citigroup sees automation job cuts

Another global bank with a major Jacksonville operation is talking about job cuts, but this time the talk is more speculative.

In an interview with the Financial Times last week, Citigroup President Jamie Forese said automation could result in major reductions in its technology and operations staff in the next five years.

As many as 10,000 jobs could be affected, he said.

Forese was talking mainly about the company’s investment banking business. Citigroup’s Jacksonville operations center handles credit card processing.

A Citigroup spokeswoman said by email the company has nothing to add about the potential impact of automation on its Jacksonville operations in the Flagler Center on the Southside.

Citigroup has operated a major credit card operations center in Jacksonville since 1997, when it bought AT&T’s Universal Card business, and it has grown to become one of the city’s largest employers.

The company added 500 jobs in 2015 and in 2016 announced plans to add another 800 to its Jacksonville operation to support business growth.

Citigroup’s employment in Jacksonville is more than 4,000.

The New York-based company’s total employment was 209,000 at the end of last year, according to Citigroup’s annual report.

Forese’s forecast came about a month after Germany-based Deutsche Bank said it would reduce its global employment from 97,000 to below 90,000. 

Deutsche Bank employs about 2,000 people in Jacksonville.

Fed approves Ameris’ Atlanta deal

The Federal Reserve Board last week approved Ameris Bancorp’s pending acquisition of Hamilton State Bancshares Inc., a deal which will greatly expand Ameris’ operations in the Atlanta market.

Ameris currently has a small presence in the market but the Fed’s order said the merger will move Ameris up from 57th largest in the Atlanta area to 17th, with $1.3 billion in deposits in the market.

The deal also will make Ameris the 136th largest U.S. bank with assets of about $9.6 billion, the Fed said.

Ameris officially is headquartered in Moultrie, Georgia, but its executive offices are in Jacksonville.

The company in January announced the agreement to buy Hamilton for about $406 million in cash and stock.

Ameris expanded in the Jacksonville market last month by completing its acquisition of Atlantic Coast Financial Corp.

FIS adds two new directors

Fidelity National Information Services Inc., or FIS, added two new directors to its board, including one from a prominent investment banking firm.

One of the new directors is Alexander Navab, former head of the Americas private equity business of Kohlberg Kravis & Roberts & Co. He left the firm in July 2017 as co-founders Henry Kravis and George Roberts promoted two other KKR executives in a succession plan.

The other new director is Brian Shea, former vice chairman and chief executive officer of investment services for The Bank of New York Mellon Corp. 

“Alex brings incredible long-term investment and M&A experience with a proven track record of leadership, strategic development and long-term value creation for KKR’s investors, as well as employees, customers and other stakeholders of KKR’s portfolio companies, while Brian brings tremendous banking technology and global operational experience to our board,” FIS Chairman and CEO Gary Norcross said in a news release.

The two new directors are not replacing any FIS board members, so the appointments increase the board from eight to 10 directors.

International Baler sales drop

International Baler Corp. reported a net loss for the second quarter ended April 30 after a sharp drop in sales.

The Jacksonville-based maker of industrial balers used for recycling and other waste disposal said sales in the quarter fell 26 percent to $1.96 million. That led to a net loss of $52,472, or 1 cent per share, in the quarter.

International Baler said in its quarterly report filed with the SEC that market conditions, including lower prices for recycled materials, resulted in lower equipment shipments in the quarter.

Shepherd’s Finance earnings rise

Shepherd’s Finance LLC reported first-quarter earnings rose by about 50 percent to $287,000.

The Jacksonville-based company is a commercial lender focused on businesses in residential construction and development.

The company in a news release said loan growth in the quarter led to increases in interest income.

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