Sparks Fly as Chairmen of Farmers, Batus Correspond

The chairmen of Farmers Group and its suitor, Batus Inc., exchanged sharply worded letters Thursday, as both companies continued to assert that their own vision of Farmers’ future is in the best interests of its shareholders.

Also, each company claimed victory in a ruling by the U.S. District Court in Reno. Batus trumpeted that Judge Howard McKibben had denied Farmers’ request for a preliminary injunction. Such an order would have prevented Batus from gathering support from Farmers’ shareholders for a non-binding resolution that asks management of the insurance holding company to open talks with Batus.

But Los Angeles-based Farmers was buoyed by the judge’s decision that Batus, the U.S. arm of a British conglomerate, must restate its written explanation to Farmers shareholders of the resolution’s impact. Farmers has claimed that the explanation suggests that a vote for the resolution is a vote to sell the company.

The letters exchanged Thursday were the aftermath of a confusing request by Farmers on Wednesday that Batus, a subsidiary of London-based BAT Industries, immediately agree to meet or raise its bid of $63 a share. Because Louisville, Ky.-based Batus had previously said it wanted to meet, the tobacco and retailing giant mistakenly interpreted Farmers’ request as strictly a demand for a higher bid. Batus’ reply rejected making an immediate higher bid, but also did not accept the invitation for a meeting.

So Thursday, Farmers Chairman and Chief Executive Leo E. Denlea Jr. stated: “BAT has repeatedly said they want to meet with us but when we issued an unconditional invitation, they failed to accept it. . . . Farmers will now proceed on the assumption that BAT does not wish a meeting and really has no higher price to propose.”

Meanwhile, Patrick Sheehy, chairman of both BAT and Batus, wrote a letter to Denlea, saying: “I am disappointed that the management of Farmers Group has chosen to ignore our requests to enter into good faith negotiations. In spite of the appearance of the letters and announcements from Farmers’ management, we can only interpret these as a clear attempt to avoid such negotiations.”

Both sides continued to argue over the terms of a secrecy agreement that Farmers wants Batus to sign before sharing its confidential business information. Batus claims the proposed agreement may limit its ability to launch a hostile takeover if friendly negotiations fail.

Farmers Group stock fell sharply Thursday. Shares in the nation’s third-largest home and auto insurer closed down $1.75 at $63.125 in over-the-counter trading.