Icahn dives back into P&C sector with attack on ‘inherently unfair’ AmTrust bid

US activist investor Carl Icahn has backed away from his battle to break up AIG and turned his attention to US based international P&C insurer AmTrust, where he sees dodgy dealings by the Zyskind-Karfunkel families that are attempting to fully buy out the insurer. On 1 March, AmTrust announced that it had entered into a definitive agreement with Evergreen Parent, an entity formed by private equity funds managed by Stone Point Capital, together with Barry Zyskind, chairman and CEO of AmTrust, George Karfunkel and Leah Karfunkel – collectively known as the Karfunkel-Zyskind Family. Under the terms of the deal, Evergreen Parent would acquire approximately 45% of AmTrust’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. The transaction values the fully diluted equity of AmTrust at approximately $2.7bn, excluding the company's outstanding preferred stock. It represented a premium of 33% on the company’s share price at 9 January 2018, when the proposed deal was first announced. AmTrust said its board of directors unanimously approved the proposed deal based upon the “unanimous recommendation” of a special committee of the board of directors, which was composed of independent directors not affiliated with the Karfunkel-Zyskind Family and is advised by its own financial and legal advisers. Don DeCarlo, chairman of the special committee, said: "The special committee and its advisers conducted an independent process and careful review of the proposal, with a focus on obtaining the best outcome for public shareholders. We believe the proposal delivers immediate and certain value for public shareholders at a significant premium to the unaffected share price, and we encourage public shareholders to support the transaction." But Mr Icahn, who owns 18.4 million shares in AmTrust (9.4% of the business), said this deal is not as clean as AmTrust is making out and has commenced litigation against the company, chairman and CEO Mr Zyskind, and board members George Karfunkel and Leak Karfunkel. The complaint was filed in the Court of Chancery of the State of Delaware. According to Mr Icahn, there are a number of big problems with this deal. He alleges that the Zyskind-Karfunkel going-private transaction undervalues the company and is happening at the wrong price at the wrong time. The deal price of $13.50 per share is less than half what AmTrust was trading for in early 2017, he pointed out. AmTrust and the families have “manipulated” the record date, which could result in a shareholder vote that severely “tilts the playing field” to advantage the Zyskind/Karfunkel families, while “blatantly” disadvantaging the public shareholders, said Mr Icahn. Because the shareholder vote is “inherently unfair”, the Delaware courts should judge the going-private transaction under the more stringent “entire fairness” standard, instead of the more deferential “business judgement” standard, he added. Mr Icahn also complained that the going-private transaction is an “opportunistic attempt to take control of a company at historic lows, right before a period of expected recovery and possible earnings growth”. He pointed out that only on Friday, Barry Zyskind “brazenly” told employees that “it is because of you AmTrust is positioned to realise the many opportunities ahead as a privately-held company”. “AmTrust [founded 20 years ago] has been run for the benefit of the Zyskind/Karfunkel families for many, many years. Excessive executive compensation and questionable dividend policies, as well as a web of related party transactions involving family-owned reinsurance companies, office towers and discounted private jet usage, has advantaged the families over the public shareholders for far too long. Now, this proposed going-private transaction is the Zyskind/Karfunkel’s final insult to AmTrust’s public shareholders,” stated Mr Icahn on his website. “We are very optimistic that the Delaware courts will not allow the Zyskind/Karfunkel families to continue their heavy-handed domination and control of AmTrust,” he concluded.

Icahn dives back into P&C sector with attack on ‘inherently unfair’ AmTrust bid

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