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Proposed National Interstate buyout gets contentious

By Jim Mackinnon
Beacon Journal business writer

Richfield-based National Interstate Corp. is not offering an opinion on a buyout offer from its majority shareholder, while company founder Alan Spachman is objecting to the process undertaken by the board of directors.

National Interstate, a specialty insurer that focuses on the transportation industry, responded Wednesday to American Financial Group’s $30-per-share “best and final” buyout offer, up from its initial $28 share price offer.

“[The] board of directors of the company has determined to express no opinion on the offer and to remain neutral with respect to the offer,” National Interstate said in a filing with the Securities and Exchange Commission. The company filed the document Wednesday after the stock market closed.

National Intestate’s board said financial adviser Duff & Phelps thought AFG’s initial $28-per-share offer “is not fair from a financial point of view.” But the advisers did not offer an opinion on the $30-per-share offer, the company said.

“The board of directors … urges each shareholder to make his, her or its own investment decision regarding the offer based on all available information,” the SEC filing said in part.

The board of directors said it voted 6-4 not to issue an opinion following a review with its legal and financial advisers.

The company said some of its directors and executives may have actual or potential conflicts of interest regarding the buyout offer. Four of National Interstate’s 10 directors are AFG executives; a fifth director recently retired from AFG.

Spachman, who founded National Interstate in 1989 and is its fourth-largest shareholder, disclosed in another SEC document that he wanted a special committee of independent directors to consider AFG’s buyout offer. The board voted against creating a special committee on Feb. 7, the company said.

Spachman, who remains a company director and was board chairman until a year ago, said in his SEC filing that opposing his proposal were “directors who are or were recently executive officers of parent or purchaser and the company’s chief executive officer.”

National Interstate’s filing said Spachman and other directors who oppose the offer “may believe that the amended offer price is inadequate.”

In addition, two shareholders are suing American Financial Group over the buyout response, alleging in part that directors breached their fiduciary duties to other public shareholders, National Interstate’s SEC document says.

AFG, a $5.1 billion insurer, already owns 52 percent of National Interstate, or 10.2 million shares. At $30 a share, the cost to buy the estimated remaining 9.5 million shares of National Interstate would be about $285 million.

AFG called the $30-per-share price its best and final offer and said the tender offer expires March 6. Cincinnati-based AFG initially offered $28 per share on Feb. 5.

AFG’s offer has boosted the value of its holdings in National Interstate from $226.1 million, based on the closing price of $22.17 per share on Feb. 4, to $305.5 million, based on Wednesday’s closing price.

Shares of National Interstate on Wednesday fell 6 cents to $29.95. Shares are up 30.2 percent, including dividends, since Jan. 1 and are down 11.9 percent from a year ago.

The $30-per-share offer is below the stock’s 52-week closing high of $35.68 on July 17.

The buyout, if approved, would mean National Interstate becomes a privately held company.

National Interstate became a publicly traded company in 2005. According to the latest available filings with the SEC, Spachman is the company’s fourth-largest shareholder with 1.82 million shares, or nearly 9.3 percent of the total. At $30 a share, those holdings are valued at $54.6 million.

The company celebrates its 25th anniversary this year.

Jim Mackinnon can be reached at 330-996-3544 or



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