|AmTrust Announces Plan To Go Private. Stocks Rise 25% By Yesterday, Wednesday. |
By Lonce Lamonte - January 10, 2018
AmTrust Financial (NASDAQ:AFSI) rose dramatically yesterday after private equity firm Stone Point Capital and the family of Barry D. Zyskind and George and Leah Karfunkel proposed to take the company private. By January 10th, Wednesday, less than two days after the announcement of the going-private project, the stock was up 25%.
AmTrust, one of the largest workers’ compensation insurers in the U.S. according to market share, was founded in 1998 by the Karfunkel family of New York. It has grown significantly in nearly 10 years via acquisitions. The Karfunkels and AmTrust Chief Executive Barry D. Zyskind presently own 43% of the insurer’s common shares.
Stone Point Capital, which is also presently a minority investor in Sedgwick Claims Management, now a world-wide claims service provider, plans to purchase the remaining common stocks of AmTrust. Stone Point offered a $12.25-a-share deal, a 21% premium over AmTrust’s closing stock price on Tuesday, January 9th. But then the share price rose to more than the offer price after the announcement.
It would make sense for shareholders to expect more than $12.25 in a buyout transaction. For one reason, the stock was trading upwards of $25 less than a year ago, prior to a hardship 2017 which included an announcement that the company had discovered a series of accounting errors which prompted it to recalculate and republish three years of earnings, together with other challenges.
In March of 2017, AmTrust delayed its 2016 annual report by a few weeks in order to conduct an audit and restate financial statements for the year. They also prepared disclosures for 2014 and 2015. The company then said it improved internal financial controls and created a chief accounting officer position.
Over the past year, AmTrust took steps to stabilize by raising $300 million in new capital from the Zyskind family along with the sale of its personal lines policy management system to National General Holdings for $200 million. AmTrust also intends to earn about $950 million more by selling a majority equity interest in some of its U.S. fee business to private equity firm Madison Dearborn partners.
AmTrust lost $174.7 million in the third-quarter of 2017 as compared to earning $80.7 million in net income in the third-quarter of 2016. The company’s combined ratio was 134.4 for the 2017 third-quarter compared to 93.4 for the 2016 third-quarter.
Part of the reason is cited to have come from hurricanes and other weather events. Chairman and CEO Barry Zyskind said AmTrust was focusing on raising money, improving its balance sheet, and promoting longer-term stability.
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