Harleysville Mutual policyholders still have to vote on the deal. And the courts have yet to rule on all the lawsuits, whose brief history filled six pages of affiliate Harleysville Group Inc.'s public filing with the Securities and Exchange Commission on Monday.
Two shareholders separately sued Harleysville and Nationwide in Chancery Court down in Delaware alleging the companies undervalued the deal; Harleysville has since justified the price by citing a favorable report from investment bank Boenning & Scattergood, West Conshohocken.
Six policyholders filed separate suits on Common Pleas Court against Harleysville Mutual arguing that mutual directors who also sit on the board of the mutual's for-profit affiliate, Harleysville Group Inc., favored themselves and other shareholders over policyholders when they voted to accept Nationwide's offer of $60 a share for their interest in the mutual, while giving the mutual's policyholders no cash.
Nationwide hired Philadelphia law firm Saul Ewing along with national firms as consultants on the deal, while Harleysville's consultants include a list of influential Pennsylvania firms: lawyers Ballard Spahr of Philadelphia, investment bank Griffin Financial Group of King of Prussia, and related law firm Stevens & Lee of Reading, among other consultants.
Industry observers Brian Sullivan, a onetime Inquirer reporter who edits California-based Risk Information Inc., and David Schiff, retired publisher of Schiff's Insurance Observer, called the arrangement a sweet deal for Harleysville Mutual directors who are also Harleysville Group directors: they stand to collect $39 million from the deal.
They noted Harleysville boss Michael Browne would get the largest share of that insider slice, with other prominent Pennsylvanians who are Harleysville directors, including Aqua America boss Nicholas DeBenedictis and former Lt. Gov. William Scranton 3d, collecting smaller sums.
The companies argued it should be enough for the policyholders that Harleysville, a small company facing tough competition, is getting taken over by Nationwide, a larger, richer mutual. Consedine agreed that's all Pennsylvania law requires.
Schiff had predicted Consedine, like previous Pennsylvania insurance czars in similar deals, would approve the deal in exchange for short-term job guarantees for Harleysville's 1,700 employees - but that litigation would drag on until Nationwide offers policyholders - the mutual's owners - some money, too.
That's what happened, he notes, in previous sales of Pennsylvania mutual insurers, including the 2001 acquisition of Provident Mutual by John Hancock Financial.
So far, Harleysville and Nationwide are insisting they are within their rights and refusing to pay policyholders cash. The policyholder suits, joined together, are the subject of a scheduled Philadelphia Common Pleas Court hearing on Thursday and Friday to consider a preliminary injunction that could possibly stop or slow the sale.