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Xerox exits insurance
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March 11, 1998: 12:32 p.m. ET
$680M sale of Crum & Forster unit caps drawn-out search for a buyer
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NEW YORK (CNNfn) - Nearly three years after beginning its exit from the insurance business, Xerox Corp. finally completed the process by agreeing to sell its Crum & Forster insurance unit to a Canadian buyer for $680 million.
In agreeing to the acquisition, Toronto-based Fairfax Financial Holdings Ltd. allowed Xerox to shed the last of seven independent insurance groups created under the name Talegen Holdings Inc. in a 1995 reorganization.
With the sale, Xerox achieved its long-standing goal to spin off the units in order to focus on its core document processing business. Some investors and analysts had begun to despair that the company would never shed the dead corporate weight on terms favorable to its shareholders.
After the news, shares of Xerox (XRX) jumped 2-13/16, or 3 percent, in late morning trading on the New York Stock Exchange, to 96-1/2.
"It's been an enormous distraction to this company to have to screw around…getting out of [the insurance business] and finally being done with it," said Alex Henderson, an analyst with Prudential Securities.
Henderson said many analysts had feared a worst-case scenario in which Xerox would be forced to write-off $500 million to $700 million. Instead, the company said Wednesday, it will take charges of $75 million in the deal, which is expected to close by the third quarter. A final write-off of $200 million, after taxes, will be taken in the first quarter of 1998 once the sale is completed.
"That's very good news," Henderson said. "It eliminates what was a big overhang on the stock and a risk factor" of a large contingent liability." He added that although Xerox was "way behind schedule" and "had hoped to be out of this years ago," company executives drew out the process because they were reluctant to settle for fire-sale prices for the remaining units.
In the end, their patience apparently paid off, though Xerox ended up getting slightly less for the units than its executives had initially hoped. Last September, the company sold The Resolution Group Inc. for $612 million to an investor group led by TRG's chairman, Michael Coutu.
Previously, Xerox had sold Coregis Group Inc., and Industrial Indemnity Holdings Inc., for a total of nearly $900 million, leaving Crum & Forster and Westchester Specialty Group on the block.
Westchester Specialty was sold in September to ACE Ltd. for $333 million in cash.
Crum & Forster, based in Morristown, N.J., is a national provider of commercial property and casualty insurance through preferred independent agents and brokers. It had net written premiums of $939 million in 1997.
Fairfax, a financial services holding company, offers property, casualty and life insurance and other services through its subsidiaries.
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Xerox Corp.
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