AFSI - AmTrust Financial Services

[writser]

A somewhat attractive idea. AmTrust is a property and casualty insurance company. Listed in 2006. Beginning of this year the founding family, together with the CEO and a private equity fund (Stone Point Capital) offered to take the company private at $13.50. The CEO and founding family own ~44% of shares outstanding. This bid was perceived to be too low. Icahn bought a 10% stake and waged a proxy war to oppose the offer. After a few months, the Karfunkel family agreed to raise the buyout price by $1.25 - a move supported by Icahn. Public Shareholders approved the new bid with a 81% vote in favor. Deal is (and was) expected to be completed in Q4.

 

Flash forward a few months. Two weeks ago the Q3 10-Q was released. A few snippets regarding the merger:

 

Consummation of the merger remains subject to certain customary closing conditions, including regulatory approvals.

The consummation of the Merger (as discussed in Note 1. "Basis of Reporting and Merger Agreement" included elsewhere in this Form 10-Q), which we anticipate will occur during the fourth quarter of 2018

 

So, looks like we're still on track for a close this year. There's been a bit of noise as a small shareholder is appealing to state regulators to stop the privatization as it 'would put policyholders at risk due to a lack of public shareholder oversight'. I totally don't buy that argument - seems like a bit of nonsense to grab headlines / make a profit. Nothing wrong with a private insurer. Finally, this is not a merger but a going-private transaction. On top of that the company is relatively small so I really don't see why regulators should oppose this deal.

 

Still, the market has gotten a bit jittery and AFSI is now trading around $14 for a ~5% discount to the merger consideration. Seems juicy. Expected to close in Q4, I don't see any reason for regulators to block this deal, financing shouldn't be a problem (big private equity firm, relatively small buyout), founding family and CEO have a huge stake, shareholders voted for the deal, Icahn still holds.

 

Of course, regulators have to do regulatory things and that could take a while longer than expected (recent example). If this deal takes another few months to complete your IRR isn't that great. Still, I think it's relatively unlikely to fail and the pre-announcement price was around $10. Valuation doesn't look crazy either so downside in case of problems seems somewhat limited. I bought a few shares. Could very well be missing something. Any insights would be appreciated.

 

Forgot to mention a key risk: I also own Asta Funding (ticker: ASFI) and am terrified I will at some point enter an order for the wrong stock .. ;)

[Jurgis]

Forgot to mention a key risk: I also own Asta Funding (ticker: ASFI) and am terrified I will at some point enter an order for the wrong stock .. ;)

 

Yes, ASFI-AFSI confusion has been going for years. I know both cos but I still have hard time to remember which is which. I guess the key is ASta Funding = ASFI, but still.  8)

[writser]

Good news, as of tomorrow there will be no more confusion between AFSI and ASFI.

 

NEW YORK, November 27, 2018 - AmTrust Financial Services, Inc. (Nasdaq: AFSI) (“AmTrust” or the “Company”) today announced that it has obtained all regulatory approvals required to complete the merger transaction in which Evergreen Parent, L.P., an entity formed by private equity funds managed by Stone Point Capital LLC, together with Barry Zyskind, Chairman and CEO of AmTrust, George Karfunkel and Leah Karfunkel (collectively, the “Karfunkel-Zyskind Family”), will acquire the approximately 45% of the Company’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 merger transaction is expected to close on November 29, 2018.

 

Obviously I got very lucky with my timing. Bought a few extra shares after opening this thread because I liked my write-up and nobody disputed it :P. Still only a ~3% position. Strange pricing last week.

[bizaro86]

Great call - congratulations!

[Foreign Tuffett]

Good news, as of tomorrow there will be no more confusion between AFSI and ASFI.

 

NEW YORK, November 27, 2018 - AmTrust Financial Services, Inc. (Nasdaq: AFSI) (“AmTrust” or the “Company”) today announced that it has obtained all regulatory approvals required to complete the merger transaction in which Evergreen Parent, L.P., an entity formed by private equity funds managed by Stone Point Capital LLC, together with Barry Zyskind, Chairman and CEO of AmTrust, George Karfunkel and Leah Karfunkel (collectively, the “Karfunkel-Zyskind Family”), will acquire the approximately 45% of the Company’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 merger transaction is expected to close on November 29, 2018.

 

Obviously I got very lucky with my timing. Bought a few extra shares after opening this thread because I liked my write-up and nobody disputed it :P. Still only a ~3% position. Strange pricing last week.

 

Writser, once again, I owe you my thanks for a well thought out merger arb idea. I will be shipping a bottle of homemade wine to you next week. I hope you enjoy it.

[Jurgis]

Good news, as of tomorrow there will be no more confusion between AFSI and ASFI.

 

NEW YORK, November 27, 2018 - AmTrust Financial Services, Inc. (Nasdaq: AFSI) (“AmTrust” or the “Company”) today announced that it has obtained all regulatory approvals required to complete the merger transaction in which Evergreen Parent, L.P., an entity formed by private equity funds managed by Stone Point Capital LLC, together with Barry Zyskind, Chairman and CEO of AmTrust, George Karfunkel and Leah Karfunkel (collectively, the “Karfunkel-Zyskind Family”), will acquire the approximately 45% of the Company’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 merger transaction is expected to close on November 29, 2018.

 

Obviously I got very lucky with my timing. Bought a few extra shares after opening this thread because I liked my write-up and nobody disputed it :P. Still only a ~3% position. Strange pricing last week.

 

Writser, once again, I owe you my thanks for a well thought out merger arb idea. I will be shipping a bottle of homemade wine to you next week. I hope you enjoy it.

 

Writser, I wish I could ship you kitchen knife without blood stains, but I'm all out.  8)

 

Thanks for the idea.

I bought a tiny position and sold today. Currently sellable for $14.76 - 1 cent higher than payout. Dumpster dive fast!  8)

[Jurgis]

Good news, as of tomorrow there will be no more confusion between AFSI and ASFI.

 

Hold that beer!  8)

 

AFSI prefs still trade... and now are in shithouse due to the company planning to delist them.

https://www.marketwatch.com/investing/stock/afsi.pa

 

MHLD are in even bigger shithouse: https://www.marketwatch.com/investing/stock/mhld

 

Not sure there's opportunity in either: prefs are presumably non-cumulative, so you can be screwed after delisting (or even without it?); have not looked at MHLD. Just FYI. (Courtesy of Barron's).

 

NEW YORK, November 27, 2018 - AmTrust Financial Services, Inc. (Nasdaq: AFSI) (“AmTrust” or the “Company”) today announced that it has obtained all regulatory approvals required to complete the merger transaction in which Evergreen Parent, L.P., an entity formed by private equity funds managed by Stone Point Capital LLC, together with Barry Zyskind, Chairman and CEO of AmTrust, George Karfunkel and Leah Karfunkel (collectively, the “Karfunkel-Zyskind Family”), will acquire the approximately 45% of the Company’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 merger transaction is expected to close on November 29, 2018.

 

Obviously I got very lucky with my timing. Bought a few extra shares after opening this thread because I liked my write-up and nobody disputed it :P. Still only a ~3% position. Strange pricing last week.

 

Strange pricings might have been people who were skeptical about management ... who lied about not delisting prefs ... and other things (read Barron's story).

 

Yeah, I know, it does not matter anymore. Just some color for consideration in future opportunities. Also posting because I've been in AFSI-prefs and Maiden prefs way back when they crashed when the management numbers were questioned.