Scpie Holdings Inc - Additional Proxy Soliciting Materials (definitive) (DEFA14A)
March 12 2008 - 8:31AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(A
MENDMENT
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
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SCPIE HOLDINGS INC.
(N
AME
OF
R
EGISTRANT
A
S
S
PECIFIED
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TS
C
HARTER
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(N
AME
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P
ERSON
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S
) F
ILING
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ROXY
S
TATEMENT
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IF
OTHER
THAN
THE
R
EGISTRANT
)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Questions and Answers Regarding ACAPs Expired Proposal
The following are answers to certain commonly asked questions regarding the expired proposal American Physicians Capital, Inc. (ACAP) made to merge with SCPIE Holdings
Inc. (SKP) prior to SKPs announcement of its pending acquisition by The Doctors Company.
Q:
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Would the combination of ACAP and SKP create a stronger, more competitive
combined company?
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A:
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No. Instead of an acquisition of SKP, ACAP proposed a merger of the two companies, which would have combined the two without improving either companys strategic challenges.
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SKPs contribution to the combined company included over 45% of capital, surplus and premiums; SKP stockholders would comprise over 40% of the combined
company. Further:
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SKPs strategic challenges would not be solved through a merger with ACAP (i.e., SKP would still need capital infusions or the support of a large capital base
to reach an A- or better rating and to compete for new business). ACAP would not bring any regional reputation or skills in the competitive California market to SKP. These problems would weigh on the combined company and its stock price.
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The combined company would need to significantly increase share repurchases to maintain ACAPs earnings per share growth trends (which would strain cash flow).
Neither ACAP nor SKP is expected to experience meaningful growth in its aggregate capital base or net income.
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Q:
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Was there a risk that ACAPs expired proposal could have delivered less than $28 per share at closing?
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A:
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Yes. ACAPs expired proposal posed the risk that, at closing, the stock consideration delivered to SKPs stockholders would have a value of less than $28 per share.
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ACAPs stock consideration is less liquid and more volatile than stock consideration from a larger acquirer.
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SKPs competitors would likely take advantage of SKPs merger with an out-of-state insurer without an A- or better rating or any ability to provide
capital support. SKP has been informed by several of its largest customers that they would leave for a competitor if SKP merged with ACAP. The loss of customers, in turn, would result in dilutive pro forma financials for ACAP, which would put
downward pressure on the trading price of its common stock.
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ACAP had proposed a variable exchange ratio within a collar. A decline in the trading price of ACAPs common stock would require ACAP to issue more shares to
fund the merger. ACAP would have needed to issue over 65% of its current shares outstanding to fund the stock consideration. The issuance of additional shares would in turn significantly impact pro forma financials and further exacerbate price
declines.
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As a result of the large number of shares issued and the collar proposed by ACAP, any typical merger arbitrage would result in further price declines.
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Q:
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Were there significant risks that ACAPs proposed merger with SKP would not have closed?
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A:
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Yes. ACAPs expired proposal had a number of closing risks:
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Since ACAP was issuing such a large percentage of its shares, a shareholder vote would be required and ACAP therefore required the flexibility to accept Superior
Proposals (and to terminate its agreement with SKP).
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If ACAP shareholders voted down the proposed merger due to ACAPs dilutive pro forma financials (resulting from expected losses of SKP customers or declines in
ACAPs trading price), then SKP would not receive a termination fee and the failure to close would be damaging to SKP and its prospects.
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If customer losses were more than 10% (as was expected with this particular bidder), then it would likely constitute a Material Adverse Effect on SKP,
and ACAP could walk away from the deal without paying a termination fee.
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In effect, the termination rights discussed in the bullets above would have given ACAP a free option on SKP. A termination of the transaction would have
significantly damaged SKPs business and reputation, and likely would have caused a decline in SKPs value in the marketplace. The termination would negatively impact SKPs subsequent ability to negotiate a transaction with any other
potential merger partner or acquirer.
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Q:
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Is ACAPs expired proposal to merge with SKP still outstanding?
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No. The proposal ACAP made to SKP prior to the announcement of the pending transaction with The Doctors Company has expired and is no longer outstanding. If the proposed transaction
with The Doctors Company is not approved by SKPs stockholders, there is no assurance that ACAP would be willing to make a new proposal to SCPIE or, if it did so, what the value and terms of the proposal would be.
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Q:
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Who can stockholders contact with further questions regarding SCPIEs upcoming special stockholder meeting to vote on the transaction with The Doctors Company?
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Please call MacKenzie Partners, Inc., SKPs proxy solicitation agent, toll-free at 800/322-2885.
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