Equitable General Corp., a McLean holding company for Equitable Life Insurance Co., has invested its own money to successfully block a potential takeover bid by Houston-based American General Insurance Co.
But there was a hint yesterday that Equitable may end up in a merger with another company - presumably through a "friendly" takeover offer as compared with American General's bid for stock.
Charles E. Phillips, president of Equitable, announced yesterday that his company will buy back at a premium price the 315,000 shares of Equitable's common stock, the American General acquired last July.
The shares, representing about 10 per cent of outstanding Equitable common stock, will be purchased at $32.50 apiece for a total investment of more than $10 million.
American General, a $4.5-billion insurance firm, had purchased the Equitable shares quietly last July 27 for $8.2 million, or $26.25 a share, from Commercial Credit Corp. of Baltimore.
At that time, American General said its purchases of stock in the local life insurer was "strictly for investment," although it indicated an interest in buying more Equitable stock and possibly taking a role in suggesting business activities for the McLean firm.
Yesterday, Phillips said the purchase price will be payable 50 per cent in cash and the balance in the form of an unsecurity promissory note by Equitable, payable one year from the expected closing in on or before Jan. 17.
Trading in Equitable stock was halted at the company's request yesterday, to allow for dissemination of the news.
Phillips said American General made the stock sale offer last Friday and that the McLean firm's board voted unanimously to accept the offer at a special meeting on Saturday.
"American General's actions had cast a cloud of uncertainty over (Equitable's) future, particularly insofar as the ownership of a 20.9 per cent block of Equitable General stock might preclude other affiliation possibilities favorable to Equitable's stockholders," Phillips said in a statement released yesterday.
American General has had an application pending before the Virginia State Corporation Commission to acquire a controlling 20.9 per cent share of Equitable stock mentioned by Phillips. The local executive said yesterday that these developments had threatened employee morale and diverted management energies from day-to-day business.
As part of the new plan, American General has agreed that if any future Equitable stock purchases are made, there will be no application to seek control for four years.
Phillips said the board concluded that purchase of its shares "represented a sound investment . . . in the best interests of Equitable's shareholders." The agreement will halt potentially costly litigation, he noted.
The insurance executive implied that Equitable may have some other merger or acquisition news in the near future.