Stock in Henrico-County-based LandAmerica Financial Group Inc., the third-largest U.S. title insurer, plunged yesterday after its planned sale to rival Fidelity National Financial Inc. was terminated Friday night.
LandAmerica shares dropped $3.83 to 51 cents. The company has lost 98 percent of its market value this year. Shares in Fidelity advanced 13 percent to $8.35.
Fidelity, the No. 2 title insurer, had planned to acquire LandAmerica for stock valued at about $128.4 million. Under terms of the agreement, LandAmerica shareholders were to get 0.993 share of Fidelity stock for each LandAmerica share.
The deal announced Nov. 7 gave Jacksonville, Fla.-based Fidelity two weeks to review LandAmerica's operations and finances.
That due-diligence period ended Friday night, and Fidelity opted out. No reason was given.
LandAmerica spokeswoman Lloyd Osgood said the real estate services company is weighing a number of strategic alternatives, but declined to elaborate.
"It's a very fluid process," Osgood said yesterday.
LandAmerica said this month it was forced to sell to Fidelity because of losses from the decline in housing sales.
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LandAmerica posted a third-quarter loss of $599.6 million, or $39.45 per share, compared with a loss of $20.8 million, or $1.28 per share, in the same period a year ago.
The insurer may be required to pay Fidelity a termination fee equal to $7.5 million or reimburse Fidelity for its out-of-pocket transaction-related expenses up to $2.5 million credited against the termination fee, LandAmerica said in a regulatory filing earlier this month.
Fitch Ratings yesterday lowered LandAmerica's insurer-financial strength rating three notches to BB from BBB+, moving the company from secure to vulnerable.
LandAmerica faces serious liquidity constraints now that the acquisition plans have fallen through, Fitch wrote.
The top three title insurers, including First American Corp. in Santa Ana, Calif., cut more than 12,000 jobs from the beginning of 2007 to the middle of this year as sales declined, reducing demand for coverage.
LandAmerica has closed hundreds of offices and reduced its workforce by more than 5,200 employees since January 2007. It had about 9,270 fulltime-equivalent employers at the end of September.
Title insurers use their databases and public records to verify a seller is a home's true owner and that the property is free from liens.
Staff writer Michael Martz and Bloomberg News contributed to this report.
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