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Delphi Merges with Tokio Marine - Analyst Blog

Wed, 16 May 2012
Zacks Investment Research

U.S. insurer Delphi Financial Group Inc. announced the completion of its acquisition by Japan-based Tokio Marine Holdings Inc. (TKOMY) yesterday.

The merger was completed for a cash consideration of approximately $2.7 billion. The acquisition price translates into a substantial premium of 42% over and above Delphi’s book value of $1.9 billion as of March 31, 2012. Delphi shareholders have been awarded a special dividend of $1 per share.

Delphi’s stock traded on the New York Stock Exchange for the last time on May 15, 2012. It would be made unavailable for trading before the opening bell on May 16 and de-listed later on.

Despite being a wholly-owned subsidiary of Tokio Marine, Delphi will continue to operate on its own. It will work in tandem with Philadelphia Insurance, another U.S. subsidiary of Tokio Marine. Though both companies will serve the same markets, there will be no conflict of interests as their products will be different from each other.

The deal which was announced in December 2011, had earlier faced opposition from Delphi’s shareholders who claimed that that the deal was structured in a way that Class B shares, held by Delphi’s CEO Robert Rosenkranz, would fetch a higher payout in comparison to Class A shares.

In January 2012, the agreement was tagged as unfair and consequently the shareholders sued the company in Delaware Chancery Court, Wilmington to stop the sale, on account of the provisions regarding “disparate consideration.”

The judge ruled that the plaintiffs may continue with their litigation. However, they could vote since they were already receiving a premium for their share. The judge also stated that discontented shareholders had the right to receive monetary compensation for Rosenkranz’s actions.

Consequently, at a special meeting held in March 2012, Delphi received approval from its shareholders with 86.1% of them voting in favor of the sale.

Delphi expects to pay its Class A shareholders a monetary compensation amounting to $49 million related to legal settlements. The liability is, however, contingent to approval from Delaware courts, due in late second half of 2012.

Following the announcement of completion of the acquisition, Fitch Ratings sprang into action and upgraded the ratings of Delphi and its subsidiaries. The rating agency upgraded Delphi’s issuer default rating (IDR) to “A-“ from “BBB”, senior notes due 2020 to “BBB+” from “BBB-“and junior notes to “BBB+” from “BB”.

The issuer financial ratings of Delphi’s chief operating subsidiaries – Reliance Standard Life Insurance Co., First Reliance Standard Life Insurance Co. and Safety National Casualty Corp. were all raised to “A+” from “A-“. All the ratings have been revised from positive to a stable outlook.

Fitch’s decision to raise Delphi’s ratings is based on the premise that the company will be able to sustain the current capital levels of its subsidiaries. Moreover, Delphi will also have the capital strength of Tokio Marine to fall back on.

Fitch views that Delphi fits very well within Tokio Marine strategic goal of expanding in the U.S. insurance market. Given Delphi’s niche presence in the excess workers’ compensation and group disability insurance markets in the U.S., the rating agency believes that Delphi may gradually become a core operating subsidiary of Tokio Marine.

TOKIO MARINE HL (TKOMY): Free Stock Analysis Report

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Zacks Investment Research

Comment on Stocks Extend Downward Move Amid Continued Greece Worries by dennis king

ino.com
Thu, 17 May 2012 02:34:11 +0000
I bought SPY May 19 135 puts when the index hit the #1 pivot high (approximately 134.45) with the high being 134.55, but I fully expected to be stopped out given the news. But it fell back to 134.16, and I was patting myself on the back, but it turned around and went back up to the highs, so I got out at break even including commissions on the pullback only to see it continue to grind lower for the rest of the day. The market acted like it did not want to go down, but it just had to. I did buy the breakout on the TZA( bear 3X ETF on Wilshire 2000) at 20.98, but I don't really like the trade, I just bit the bullet. I also bought calls on TBT when the bonds sold off this morning only to see bonds turn stronger than horseradish later. I am in the June calls on those trades, and I am questioning my sanity. I think the market goes lower tomorrow setting up for a 3 day relief rally starting Friday. I am looking for a bottom on gold tomorrow or in after hours trading Thurs night at 1493. Sometimes, it is better to just wait a day or two.

Stocks Extend Downward Move Amid Continued Greece Worries

ino.com

(RTTNews) – Stocks showed a notable downturn over the course of the trading day on Wednesday after failing to sustain an early upward move. The pullback came as worries about the political situation in Greece once again overshadowed a batch of upbeat U.S. economic data. The major averages all ended the day in negative territory, ...

Comment on Stocks May Regain Some Ground In Early Trading by gg

ino.com
Wed, 16 May 2012 20:18:57 +0000
These inverse etf's I don't think have moved to 100+ green yet. But some of the good inverse etf's that I have traded are FAZ, SDS, DXD, SKF, and TZA.

Sunshine Stock: Brown-Forman

CNBC.com
Wed, 16 May 2012 18:25 GMT
Brown-Forman is trading at all-time highs and at levels not seen since its IPO in 1968, with CNBC's Brian Sullivan and Amanda Drury.

JPMorgan's 'Whale' Trader Set to Leave

CNBC.com
Wed, 16 May 2012 17:31 GMT
CNBC's Mary Thompson discusses the details of a reported departure of one of JPMorgan's biggest traders in the division that was hit with a $2 billion trading loss.

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