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Strategies & Market Trends : Z PORTFOLIO -- Ignore unavailable to you. Want to Upgrade?

To: pz who wrote (3014)	8/4/1999 4:58:00 PM
From: JB	Respond to of 11568

LFG Take-over target Day Trader special This morning on the call we discussed LandAmerica Financial, LFG, as a takeover idea because Reliance, which owns 45%, is going to have to sell assets to shore up capital. We believe the most likely buyer is First American Financial, formerly the largest title company, and the price would be north of $50. LFG is currently at $24. Data about LFG: Market cap: $405 million Float: $305 million Share float 12.5 million 52 week high is $55 -- stock could easily command this price (or more) in a takeover. Why the title insurance industry is consolidating: This is very high fixed-cost-intensive business -- the asset being "title plant" or history of real estate transactions that is maintained by each company. The industry is battling for shelf space in the real estate agent's office. Also, the title companies are starting to sell other services such as appraisals and home warranty. Both of these factors require scale and technology. There will probably be a duopoly in the industry, and LFG is the third largest title company (post the Chicago Title Fidelity National merger). We doubt that REL would sell only its minority stake; a deal only makes sense if LFG is sold in toto. CTZ was taken out at more than 2X book. LFG's book value is $44. However, we doubt it would get a valuation close to CTZ's because they company has disappointed in the last year by incurring more expenses than expected. Nevertheless, we consider FAF a motivated buyer and Reliance is well positioned to negotiate.