AmTrust go-private plan supported by second advisory firm

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.

The transaction would allow Stone Point Capital, the Karfunkel Family, and AmTrust CEO Barry Zyskind acquire AmTrust equity for $13.50 per share 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 would 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.

Activist investor Icahn has filed a lawsuit against AmTrust 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. Icahn reportedly argued that the going-private deal unfairly benefits the controlling Karfunkel family at the expense of public stockholders.

Icahn says that the deal to take AmTrust private is an “opportunistic ploy to take out the minority shareholders at an extremely cheap price ahead of a period of earnings recovery”.

Icahn is therefore seeking support among shareholders to vote against the going private transaction at the “rock bottom price of $13.50 per share” at the squeeze-out shareholder meeting scheduled for June 4, 2018.

But AmTrust said that in its May 29, 2018 report, Egan-Jones stated the following: "Based on the review of publicly available information on strategic, corporate governance and financial aspects of the proposed transaction, Egan-Jones views the proposed transaction to be a desirable approach in maximizing shareholder value. After careful consideration, we believe that approval of the merger is in the best interests of the company and its shareholders and its advantages and opportunities outweigh the risks associated to the transaction."

AmTrust issued the following statement: “We are pleased that these two leading proxy advisory firms have joined independent industry analysts and our board in recognizing the premium value provided by the merger and the significant downside risks faced by public stockholders should the merger not be approved. In its report, even Institutional Shareholder Services ("ISS") acknowledged that there could be a decline in AmTrust's stock price if the merger is rejected, notwithstanding ISS's flawed conclusion to recommend against.”

Amtrust has faced significant headwinds since 2015 after public filings were delayed, financial statements were restated, losses increased across several lines of business and AM Best placed the company’s credit rating under review.

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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