The puzzle of Gregory Shepard

May 24. 2013 12:00PM - Last modified: May 24. 2013 12:35PM

Tim Stuhldreher

I sure wish I knew what activist shareholder Gregory Shepard is up to with his tender offer at Donegal Group Inc.

Tim Stuhldreher

As the Business Journal reported this week, Shepard extended his offer for Donegal’s Class B shares to July 31. Ostensibly, that’s to give him additional time to secure regulatory approvals.

But as we reported in that article, he hasn’t been offered a single additional share since he extended the offer the first time April 19. The number stands at 383,540, then and now.

And as we reported in some detail May 3, he can’t meet the 925,000-share minimum he set for doing the deal unless Donegal executives sell him their stock. Given their adamant opposition to his vision of Donegal merging or selling out to another insurance firm, they’re about as interested in doing that as Michele Bachmann is in joining the Obama Cabinet.

In his May 17 filing amending his tender offer, Shepard makes some disclosures about what Donegal means to him. He pegs his net worth at $100 million to $120 million, and says his Donegal stock purchases, begun in 2005, have cost him $58.6 million.

Well, you don’t amass a fortune north of $100 million without being a smart guy. Smart enough not to hatch a scheme that depends on buying stock from folks who aren’t going to sell.

So that couldn’t have been the plan. The tender offer has to be a gambit, part of a larger strategy. But what is it? One theory says if Shepard is pesky enough, Donegal will buy him out; another says that if he can demonstrate Donegal is shortchanging minority investors, it could give him legal leverage to force the changes he wants.

Or maybe it will turn out to be something else entirely. I’m eager to see what happens next.

• • •

The Wall Street Journal reported this week on a Federal Reserve study of debit-card fees, and the caps on them that were a controversial part of the Dodd-Frank financial reform law.

The law caps large banks’ transaction fees, but lets banks under $10 billion charge more. Small banks said pricing pressure would force their fees down to match the large banks’, but that hasn’t happened, the Fed study said.

That suggests the small banks’ exemption from the cap “is working as intended,” the Fed said.

Not everyone agrees. Retailers, large banks, small banks and credit unions all continue to squabble over the fee limits, a battle “which has spilled from Capitol Hill to class-action lawsuits,” the Journal reports.


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