News Column

Donegal Group gets new proposal

June 19, 2014

By Tim Mekeel, Intelligencer Journal/Lancaster New Era, Pa.

June 19--If at first you don't succeed ...

A disgruntled Donegal Group shareholder has announced another attempt to increase his role in the Marietta-based firm.

Gregory M. Shepard proposes an "amicable" transaction where he would roughly double his Class A shares but sell all of his Class B shares.

Shepard says he would proceed only with the blessing of the boards of Donegal Group and its majority shareholder, Donegal Mutual Insurance.

Shepard, an attorney who lives in Bradenton, Florida, announced his latest proposal Wednesday.

In this new plan, Shepard proposes to buy 3.97 million additional Class A shares of Donegal Group. He now has 3.67 million Class A shares.

These would be bought either in market purchases, privately negotiated purchases or via a tender offer, presumably at a premium price.

Based on Wednesday's closing price of $15.64 a share, Shepard's Class A purchase would cost him at least $62.09 million.

Shepard also has 397,100 Class B shares, which he would sell to Donegal Mutual or a third party.

Based on Wednesday's closing price of $21.00 a share, his Class B divestiture would bring him $8.34 million.

Shepard's current Class A and Class B stakes combined give him 9.99 percent of the voting power in Donegal Group.

If the transactions were to occur, his voting power would remain less than 10 percent, Shepard says.

However, he wants more than the stock transactions.

He also would want to discuss with Donegal Group and Donegal Mutual seats on the two firms' boards for him and/or his representatives.

Shepard, a Donegal shareholder since 2005 and a frequent critic of its management, has been trying since March 2013 to increase his stake in the company or put control in new hands.

Donegal management has rejected each of the half-dozen proposals, calling them "illusory" or not in the company's best interests.

Undeterred, Shepard says his latest pitch is "in the best interests of both (Donegal Group) and Donegal Mutual, their policyholders, and their other constituencies....

"(I)t would give Donegal Mutual what it wants - namely, more Class B Shares; and it would also give the Class A Shareholders what they want, which is liquidity and the opportunity to sell their shares at a premium over the then-prevailing market price."


(c)2014 Intelligencer Journal/Lancaster New Era (Lancaster, Pa.)

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Source: Intelligencer Journal/Lancaster New Era (PA)

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