AmTrust Financial Services Inc. management may need to increase the company's sale price in order to lock down support from an activist investor who appears to have gummed up the works for a planned going-private transaction.
Investor Carl Icahn led a proxy battle against the deal and may have influenced enough minority shareholders to reject the deal. After failing to secure support from a majority of AmTrust's minority shareholders, the company announced it would sit down with Icahn to try to find a way to move forward.
Amid the public back and forth between Icahn and AmTrust, several proxy advisory firms weighed in on the deal. Two of them advised shareholders to vote in favor of the transaction, while the third urged them to reject the deal.
Keefe Bruyette & Woods equity analyst Meyer Shields said that, if anything, the announcement that the deal failed to win over a majority of the minority shareholders showed that the company "clearly needs to get Icahn on board."
"What's probably necessary is some form of increased compensation for the deal to go through as opposed to them staying public," Shields said in an interview.
The company has "a lot of work to do" to resolve its reserve and financial reporting issues as well, according to the KBW analyst.
"That's an awful lot of stuff to turn around in the public eye, particularly if you're a company that's as remarkable as AmTrust," Shields said. "I think they're frankly much better served out of the public spotlight."
In January, AmTrust CEO Barry Zyskind and George and Leah Karfunkel offered to buy 45% of the company's outstanding shares that the family does not own in cash to take the company private in partnership with Stone Point Capital LLC.
Icahn argued that the $13.50 per share buyout offer significantly undervalued the company. He claimed in an investor presentation that AmTrust should be valued at between $20 and $35 per share, for a total valuation of about $6.8 billion.
Icahn owns about 9.4% of AmTrust's outstanding shares.
The company adjourned a special shareholder meeting held to adopt the deal when it made the announcement it did not have enough minority shareholder votes to clear the transaction requirements. The company plans to reconvene the meeting June 21.
Shares of AmTrust ticked up 1.12% on the day of the announcement, tracking with the broader market.
