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Activist investor's latest Donegal Group offer rejected while company reports strong Q3

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The Donegal Group Inc. has rejected another offer from minority stockholder Gregory Shepard to acquire a controlling interest in the company.

The company's board of directors again called the offer "illusory" and said Shepard hadn't received all the necessary regulatory approvals to make the purchase he outlined in an Oct. 7 offer, which outlined a plan in which another insurance company would buy Lancaster County-based Donegal.

The rejection was unanimous on the company's board, according to a letter to Shepard from Donald H. Nickolaus, Donegal's board president.

In the Oct. 7 offer, the latest in a series of offers Shepard had made to take controlling interest of the Donegal Group, he said he and a "much larger, highly rated mutual property and casualty insurance company" would negotiate a price between $33 and $37 per share for the 957,136 shares of publicly traded Class B shares not owned by Donegal or by Shepard.

The acquiring mutual would then buy more than 9 million publicly traded Class A shares that were available.

Shepard noted in his offer he knew two companies willing to make the offer, but didn't name either company.

Shepard said if the company would agree to the sale, he would then offer his stock holding in the company to the "acquiring mutual." He called it an "incentive."

Donegal's board considered the offer in a meeting Oct. 17, and the board voted down the offer, confirming it with a letter to Shepard the company reported through an SEC filing Thursday.

Shepard, a minority shareholder in the Donegal Group who has criticized the direction of the company, has offered multiple times this year to buy a larger stake in Donegal. Each time, his offer has been refused by its board of directors.

The rejection came one day before Donegal announced today a near-12-percent jump in net income from the third quarter of 2012 to the 2013's third-quarter net income of approximately $7.7 million.

The net income price per diluted stock went from 27 cents in the third quarter of 2012 to 30 cents in 2013's corresponding quarter, up about 11 percent.

Shepard's third-quarter attempts at the stock purchase were not mentioned in the company's report.

Donegal Group is an insurance holding company, with the company's Class A stock trading on the Nasdaq under DGICA and the Class B stock under DGICB.

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