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Donegal holder makes $29M tender offer

By , - Last modified: March 22, 2013 at 2:21 PM

An activist shareholder in Lancaster County-based insurance holding company Donegal Group Inc. is attempting to substantially increase his voting power.

Gregory M. Shepard of Florida filed a tender offer Wednesday to buy 962,636 shares of Donegal Group stock for $30 per share in cash — a transaction worth roughly $29 million.

The offering price is about 42 percent above Tuesday's closing price for the shares, Shepard noted in a statement.

The purpose of the offer is to enable Shepard "to increase his voting securities from 9.99 percent of the company to 22.7 percent," according to documents filed with the Securities and Exchange Commission.

Shepard also is seeking the appointment of three members to the boards of Donegal Group and Donegal Mutual Insurance Co., without board expansion.

Shepard has vigorously advocated for the sale or merger of Donegal Group, arguing the company is shortchanging investors and harming its stock price by remaining independent.

"DGI has not been successful in delivering a positive return for its shareholders," Shepard said in his statement.

Donegal Group Inc. is a downstream holding company formed by Donegal Mutual Insurance Co. Its shares trade on the Nasdaq under the ticker symbols DGICA and DGICB.

The tender offer indicates Shepard owns 18 percent of Donegal Group's class A stock and 7.1 percent of its class B stock.

If Shepard's purchase goes through, it will nearly eliminate the number of Class B shares available for public trade and will likely result in Nasdaq delisting it, the tender offer said.

Donegal issued a statement this afternoon saying it would issue a recommendation on Shepard's offer to its shareholders by April 3 and urging them to take no action beforehand.

The offer expires April 19, according to the tender documents. It also is subject to change, based on Shepard's negotiations with Donegal, the documents said.

A call to Donegal seeking additional comment was not immediately returned.

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