Harleysville Mutual Insurance Company
Harleysville Mutual Insurance Company
UPDATE: On December 14, 2012, the Honorable Patricia A. McInerney of the Court of Common Pleas of Philadelphia, approved the settlement entered into on October 10, 2012 by the parties in the In re Harleysville Mutual litigation (No. 02137, NOvember Term, 2011). The settlement provides for a payment of $26 million to a class consisting of policyholders of Harleysville Mutual Insurance Company ("Mutual") in consideration for their release of claims arising out of the merger between Mutual and Nationwide Mutual Insurance Company.
UPDATE: On January 13, 2012, the Court appointed our firm as co-lead plaintiffs' counsel in the case. A copy of the order can be downloaded on the right.
UPDATE: On December 30, 2011, we filed a second complaint on behalf of another policyholder-member of Harleysville Mutual Insurance Company (Harleysville Mutual) arising from the proposed acquisition by Nationwide Mutual Insurance Company (Nationwide) of Harleysville Mutual and its direct and indirect subsidiaries, including Harleysville Group, Inc. (Harleysville Group), a public company in which Harleysville Mutual owns a controlling 53.5% interest. A copy of the second complaint can be downloaded using the link in the righthand sidebar.
UPDATE: On December 27, 2011, we filed an amended complaint in the action following the December 23, 2011 filing by Harleysville Group, Inc. of the preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission (“SEC”) concerning the proposed transaction with Nationwide. A copy of the amended complaint can be downloaded using the link in the righthand sidebar.
On November 22, 2011, we filed a complaint alleging class and derivative claims on behalf of policyholders-members of Harleysville Mutual arising from the proposed acquisition by Nationwide of Harleysville Mutual and its direct and indirect subsidiaries, including Harleysville Group, a public company in which Harleysville Mutual owns a controlling 53.5% interest.
Under the terms of the proposed acquisition, Harleysville Mutual's policyholders-members will become policyholders and members of Nationwide but will not receive any cash payment or other compensation for their ownership interest in Harleysville Mutual or its 53.5% stake in Harleysville Group and other substantial assets. By contrast, the minority public shareholders of Harleysville Group will receive over $750 million in cash, yielding them an extraordinary 137% merger premium - over four times the average of other recent insurance industry merger transactions.
The complaint alleges that the proposed acquisition was structured in this manner in order to unfairly benefit the members of the Harleysville Mutual board of directors, each of whom holds large numbers of shares, restricted stock, and/or options in Harleysville Group, and who collectively will receive a payout of $39.2 million in cash from these interests if the proposed acquisition proceeds as currently structured.
The complaint further alleges that had the merger premium obtained from Nationwide been fairly allocated pro rata to Harleysville Mutual based on its 53.5% controlling interest in Harleysville Group and other assets, Harleysville Mutual policyholder-members would have received over $275 million in cash. However, a fair pro rata allocation of the merger premium would have cut the cash payout received by the directors of Harleysville Mutual by more than half.
The complaint alleges that the decision by the directors of Harleysville Mutual to approve a transaction in which the minority shareholders of Harleysville Group receive the entire merger premium, and in which no cash payment is allocated to Harleysville Mutual's controlling stake in Harleysville Group or other assets, is fundamentally unfair, and constitutes manifest self-dealing and unjust enrichment, warranting the issuance of an injunction and imposition of a constructive trust.
A copy of the complete amended complaint may be downloaded via the link in the right sidebar.
Harleysville Mutual policyholders-members with any questions about this pending litigation should contact the attorney listed below.