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Michigan lawmakers are pushing through legislation explicitly aimed at blocking a potential takeover of Fremont Michigan InsuraCorp by a holding company better known for its stewardship of a chain of burger restaurants.
The bill would require a vote by a super-majority of two-thirds of shareholders plus one -- instead of the current 50% plus one threshold -- in order to approve the sale of an insurer when the board of directors opposes the deal. The restriction, as amended in the House Insurance Committee, would apply only to Michigan-domiciled property/casualty insurers who write 100% of their premiums in the state and have 200 employees or fewer.
In December, Fremont's (OTC: FMMH.OB) board unanimously rejected a takeover offer made by the Steak n Shake holding company, the owner of an eponymously named 485-restaurant chain (BestWire, Dec. 23, 2009). Fremont Insurance Co. writes commercial and personal automobile, homeowners, mobile homeowners, farmowners, commercial multiperil and marine coverages exclusively in the state of Michigan, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database. The company markets its products through approximately 180 independent agencies.
State Sen. Gerald Van Woerkom, R-Muskegon, drafted the bill at the request of Fremont executives, Chief of Staff Jeff Cobb said. The company is based in Van Woerkom's district. The legislation may apply to other insurance companies, he said, but the idea is solely to protect Fremont from a potential hostile takeover.
"We want it to address only Fremont if we can," Cobb said.
The House Insurance Committee approved S.B. 1174 on April 15, with an amendment that tightened the criteria so as to exclude an insurer who did not wish to be covered, Cobb said. The Senate previously voted 27-10 to back the bill. The full House of Representatives will likely vote within days, he said.
"Our plan would be to have it in place by the next shareholders' meeting," Cobb said.
The Indianapolis-based holding company recently changed its name from Steak n Shake Co. to Biglari Holdings Inc., after its chief executive officer, Sardar Biglari. The move reflects the company's previously announced establish itself as an active holding company, the company said in a statement. Its stock now trades on the New York Stock Exchange under the symbol BH instead of SNS.
Attempts to reach Biglari Holdings officials for comment were unsuccessful. The company wanted to buy all shares it doesn't already own of Fremont Michigan InsuraCorp Inc. for $24.50 per share -- an 11.3% premium to the closing price of Fremont stock on Dec. 21. The offer would have paid 50% in cash and 50% in shares of common stock of Biglari Holdings.
Attempts to reach Fremont representatives for comment were unsuccessful.
Fremont Insurance Co. has a current Best's Financial Strength Rating of A- (Excellent).
On the morning of April 16, shares of Fremont Michigan InsuraCorp stick were trading at $23, unchanged from the previous close.
(By Sean P. Carr, Washington Correspondent: [email protected])