Opinion ID: 1934995
Heading Depth: 1
Heading Rank: 9

Heading: Unitrin's Repurchase Program

Text: The Unitrin Board met again on August 11, 1994. The minutes of that meeting indicate that its principal purpose was to consider the Repurchase Program. At the Board's request, Morgan Stanley had prepared written materials to distribute to each of the directors. Morgan Stanley gave a presentation in which alternative means of implementing the Repurchase Program were explained. Morgan Stanley recommended that the Board implement an open market stock repurchase. The Board voted to authorize the Repurchase Program for up to ten million shares of its outstanding stock. On August 12, Unitrin publicly announced the Repurchase Program. The Unitrin Board expressed its belief that Unitrin's stock is undervalued in the market and that the expanded program will tend to increase the value of the shares that remain outstanding. The announcement also stated that the director stockholders were not participating in the Repurchase Program, and that the repurchases will increase the percentage ownership of those stockholders who choose not to sell. Unitrin's August 12 press release also stated that the directors owned 23% of Unitrin's stock, that the Repurchase Program would cause that percentage to increase, and that Unitrin's certificate of incorporation included a supermajority voting provision. The following language from a July 22 draft press release revealing the antitakeover effects of the Repurchase Program was omitted from the final press release. Under the [supermajority provision], the consummation of the expanded repurchase program would enhance the ability of non-selling stockholders, including the directors, to prevent a merger with a greater-than-15% stockholder if they did not favor the transaction. Unitrin sent a letter to its stockholders on August 17 regarding the Repurchase Program which stated: Your Board of Directors has authorized the Company to repurchase, in the open market or in private transactions, up to 10 million of Unitrin's 51.8 million outstanding common shares. This authorization is intended to provide an additional measure of liquidity to the Company's shareholders in light of the unsettled market conditions resulting from American General's unsolicited acquisition proposal. The Board believes that the Company's stock is undervalued and that this program will tend to increase the value of the shares that remain outstanding. Between August 12 and noon on August 24, Morgan Stanley purchased nearly 5 million of Unitrin's shares on Unitrin's behalf. The average price paid was slightly above American General's Offer price.