NEW YORK--(BUSINESS WIRE)--The following is a letter from Gideon King, President of Loeb Capital Management to the Board of Directors of Fremont Michigan InsuraCorp, Inc.
Board of Directors
Fremont Michigan InsuraCorp, Inc.
933 East
Main Street
Fremont, Michigan 49412
To the Board of Directors:
Loeb Arbitrage Management LP and Loeb Offshore Management LP d/b/a Loeb Capital Management (“LCM”) are increasingly frustrated by the stewardship of Fremont Michigan InsuraCorp, Inc. (OTC: FMMH). We believe the company’s response to the proposed offer of $31.00 per share by Biglari Holdings, Inc. (New York: BH) (“Biglari”) was inappropriate and suggested a lack of respect for the owners of the company. The press release issued by FMMH on January 12, 2011 included the following language: “The special committee also disclosed that it retained Philo Smith Capital Corporation as its financial advisor to explore a broad range of strategic alternatives to enhance shareholder value. These alternatives include, but are not limited to, a revised business plan, operating partnerships, joint ventures, strategic alliances, acquisitions, exchange listing applications, a recapitalization, and the sale or merger of Fremont.” Also included is the following phrase: “Neither Fremont nor the special committee has set a definitive timetable for completion of its evaluation.”
What does all of this even mean? A “revised business plan?” Should this lead us to believe that the current business plan is flawed and that conjuring up a new business plan with all of the risks involved is better for owners than a sale to the highest bidder? Should we be further led to believe that your newfound interest in endeavors such as “joint ventures,” “operating partnerships,” “acquisitions” and other mechanisms of avoidance are superior for shareholders to a sale to the highest bidder? Should we take the opinion that your avoidance of dialogue with representatives from Biglari, as outlined in the October 11, 2010 letter from Sardar Biglari to the Board of Directors of FMMH, is good for shareholders? Is it good for shareholders that the management team and Board of FMMH have helped to disenfranchise shareholders by helping to cement the application of Michigan Public Act 61 Section 1311(2) to its shareholders? Your actions as they relate to Biglari’s offer indicate to us that the leadership at FMMH does not take its fiduciary duties seriously. What is perhaps most frightening to us is your depiction of the value-enhancement process (which we feel should be a value-maximization process and not a value-enhancement process) as a process without a timetable. We believe that any well-organized value-enhancement process should be governed by a strict timetable if possible; a sophisticated dealmaker should know that deals tend to ripen and then rot if not consummated in a timely and organized fashion. Frankly, we feel that the management and Board of FMMH, in light of the issued press release, wish for the one value-enhancing event that has occurred in recent history to simply vanish with time and attrition of buyer interest.
Being holders (along with affiliates over which LCM has management discretion) of 9% of the equity of the company, allow us to be clear: if it is possible here and now to sell the company to the highest bidder (which seems like a plausible scenario in light of Biglari’s actions), then we are overwhelmingly in favor of doing so. We feel this way because this management team has not demonstrated to us that it can create value. In fact, $31.00 per share is higher than any trading price in the history of the company; we refer readers of this letter to read our letter to the Board of Directors dated October 18, 2010 (enclosed with our 13D filing of the same date), which outlines FMMH’s precarious position in the capital markets. Further, we do not wish for FMMH to enter into a transaction whereby stock is sold to new or existing shareholders in order to dilute the influence of existing shareholders.
Again, as 9% shareholders, we think it is superfluous if not damaging to engage in a ponderous exploration of a wide array of strategic alternatives when premium bids are at our feet. If the company does not realize at least $31.00 per share in solid and near-term value for shareholders from this process, then we will conclude that this Board and management team should be removed at the next opportunity. We would vote you out right now if we could; unfortunately, we gave you the benefit of the doubt.
We were surprised that the company refused to meet with us as we requested in our last letter; however, we would no longer be surprised by anything this management team and Board would do. While it may be in vain, we request that FMMH disclose the identities of the members of the “special committee” so that shareholders may contact such members and express their wishes directly.
It should be a simple matter to auction this company to the highest bidder and make money and create liquidity for shareholders.
| Sincerely, |
| Gideon King |
| President, Chief Investment Officer |