Investment firm Steel Partners II L.P. wants to increase its holdings in Conseco Inc. and to have a bigger say in the company’s operations.
The firm says one goal is to push Conseco, Carmel, Ind., to sell off a closed block of long term care insurance business.
In a filing with the U.S. Securities and Exchange Commission, Steel Partners, New York, says it has formally asked Conseco’s board to support its bid for increased ownership.
Steel Partner says it wants to increase its current 9.8% stake in Conseco to as much as 22%.
In a letter to the board, the investment firm says it wants to acquire the additional shares through a “Dutch auction.”
Managers of a Dutch auction start with a relatively high requested price and then drop the price step by step until a would-be buyer submits a bid.
“We continue to believe that the [Conseco] shares are undervalued at the current price levels and are interested in purchasing additional shares,” Steel Partners says.
Steel Partners says it would tender an offer of $12.50 to $14 per share. It also says it will try to buy more shares in the open market later.
On the day of the filing, May 19, Conseco’s shares were selling at about $11.70.
Steel Partners notes that it is not permitted under regulations to acquire 10% or more of Conseco shares without first complying with insurance holding company filing requirements. The company has asked Conseco to advise insurance regulators that Conseco would not object to Steel Partners increasing its ownership.
Steel Partners told the board that it thinks the board has been too slow to carry out a strategic review of operations and that the return on equity of Conseco’s insurance group should be improved.
Conseco should find “a way to remove the long term care block exposure,” Steel Partners says.
A Conseco spokesman says the company’s board is thinking about Steel Partner’s request “and is giving due consideration to the level of stock ownership” proposed in the letter.