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Anbang Insurance reduced offer for Fidelity & Guaranty Life after due diligence, filing reveals

AnbangInsurance Group Co. initially offered to for$28.00 per share but reduced the aggregate purchase price by about $70 millionto reflect the final outcome of its due diligence review, a March 29 regulatoryfiling reveals.

After HRGGroup Inc. announced it was exploring strategic alternatives for Fidelity, theinsurer on April 24, 2015, engaged Credit Suisse and Skadden Arps Slate Meagher& Flom LLP as its financial and legal advisers, respectively. The boardlater tapped Jefferies LLC as an additional financial adviser. Credit Suisseand Jefferies then initiated contact with 49 potential bidders in May 2015.

Several companies showed interest, including Anbang, whichproposed a price of $28.00 per share in cash. Bidder A proposed a price rangeof $25.00 per share to 26.00 per share in cash with flexibility to considerstock-for-stock, Bidder B proposed a price of $26.00 per share in cash, BidderC proposed a price range of $24.00 per share to $27.00 per share in cash,Bidder D proposed $25.00 per share in cash; Bidder E proposed an implied pricerange of $22.15 per share to $25.55 per share in a mix of equity and cash to bedetermined; Bidder F proposed a price of $25.54 per share in cash; Bidder Gproposed a price of $25.00 per share in cash; Bidder H proposed an impliedprice of $25.49 per share in cash and Bidder I proposed a price range of $25.00per share to $26.50 per share in cash.

All the bidders, except Bidder D and Bidder G, were theninvited to continue to the next round of the process. Between July 9 and July15, 2015, each of Bidder E, Bidder H and Bidder I withdrew from the process.Credit Suisse and Jefferies on July 16, 2015, distributed a process letter,draft merger agreement and disclosure letter to the draft merger agreement tothe five interested parties Fidelity had advanced to the next round andremained in the process. Bidder F later withdrew from the process.

Bidder A and Bidder C on July 30, 2015, each submitted amark-up of the draft merger agreement. Simpson Thacher & Bartlett LLP, legaladviser to Anbang, on July 31, 2015, submitted a mark-up of the draft mergeragreement on behalf of Anbang. Bidder C on Aug. 14, 2015, withdrew from theprocess.

Fidelity on Aug. 14, 2015, received a revised mark-up of themerger agreement and an updated written proposal from Anbang offering $28.00per share. Fidelity also received an updated written proposal from Bidder Aoffering a per-share price below the then-current trading price of Fidelity'sshares. It also received a written proposal from Bidder B offering to acquireonly a portion of the company's assets. Bidder B proposed to pay an aggregateconsideration of $490.7 million for such portion of Fidelity's assets, payablein cash at closing without a financing contingency.

After a review of the proposed transactions by Anbang,Bidder A and Bidder B, Fidelity's board determined to focus on discussions withAnbang.

Credit Suisse on Aug. 19, 2015, spoke with Evercore GroupLLC, Anbang's financial adviser, and Skadden spoke with Simpson Thacher and Debevoise& Plimpton LLP, to discuss, among others: Fidelity's information requestsrelating to Anbang; Anbang's proposed requirement that HRG provide astockholder written consent approving the merger, which coupled with provisionsof the merger agreement, would not permit Fidelity to terminate the mergeragreement in favor of a superior proposal; and Anbang's revisions to theregulatory sections of the merger agreement, including the efforts required tobe made by Anbang to obtain regulatory approval for a transaction and theactions that Anbang would not be required to take in order to obtain regulatoryapproval. Discussions continued between Fidelity and Anbang and they revisedthe draft of the merger agreement several times.

Meanwhile, Bidder B partnered with Bidder A and on Oct. 25,2015, submitted a joint proposal to acquire all of the outstanding shares ofFidelity below the then-current trading price. Pursuant to the proposal, BidderA and Bidder B would each acquire certain Fidelity assets. Fidelity laterindicated to both bidders that the price they offered was not attractive. Bothindicated that they may be able to further raise their price depending on theoutcome of their diligence and negotiation of the transaction documents.

Anbang on Nov. 1, 2015, proposed to reduce the aggregatepurchase price by about $70 million to reflect the final outcome of its duediligence review, resulting in a price of about $26.82 per share. Anbang'srevised offer was not accepted.

A Fidelity principal on Nov. 2, 2015, communicated to Anbangthat he would be willing to discuss with the board an offer of $27.00 pershare. Anbang did not accept Fidelity's proposal and stated that its offer,after taking into account a reduction of about $70 million from the purchaseprice, was $26.80 per share.

The Fidelity board on Nov. 8, 2015, determined that pursuingthe proposed merger with Anbang represented a greater likelihood of maximizingshareholder value than continuing discussions regarding the joint proposal fromBidder A and Bidder B. The board's decision was made in light of the highervalue offered by Anbang, the less complex transaction structure proposed byAnbang compared to the structure of the joint proposal from Bidder A and BidderB, including the regulatory implications, and Anbang being further along in theprocess, including having finalized negotiations of a merger agreement andcompleted due diligence.

Fidelity and Anbang on Nov. 8, 2015, executed the mergeragreement, and thereafter FS Holdco II Ltd., a unit of HRG and the directholder of HRG's 80.7% ownership interest in Fidelity, delivered the writtenconsent.

Fidelity and Anbang on Nov. 9, 2015, issued a joint pressrelease announcingthe transaction.