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The deal to sell the Henrico County-based title-insurance and real estate services provider to larger rival Fidelity National Financial Inc. was called off.
Neither company gave a reason.
"We are disappointed with Fidelity's decision," LandAmerica Chairman and Chief Executive Theodore L. Chandler Jr. said in the statement. "However, our attention remains focused on strengthening LandAmerica's business and exploring strategic alternatives during these incredibly difficult economic times,"
Both companies agreed to the merger Nov. 7.
The deal gave Jacksonville, Fla.-based Fidelity two weeks to review LandAmerica's operations and finances. That due-diligence period ended last night, and Fidelity opted out.
Officials with LandAmerica or Fidelity did not return phone calls.
Mark Dwelle, an analyst with RBC Capital Markets in Richmond who follows LandAmerica, said he was surprised Fidelity terminated the deal.
"They must have found something they were not comfortable with, or the share prices of both companies have been under a lot of pressure this week and maybe they felt that with the markets so unstable that it wasn't prudent at this time to be doing a deal like this," Dwelle said.
Etti Baranoff, an associate professor of insurance and finance at the University of Richmond's Robins School of Business, said LandAmerica's finances and operations could have revealed some unanticipated problems.
"If the due diligence shows things were not OK, maybe the right numbers were not behind it," she said.
At the time the deal was announced, Fidelity had planned to acquire LandAmerica for stock valued at about $128.4 million. Under terms of the agreement, LandAmerica shareholders were to get 0.993 share of Fidelity stock for each LandAmerica share.
But Fidelity's stock has dropped 96 cents since the deal was announced, putting the value at $113.5 million.
Dwelle is concerned about LandAmerica's future.
"This is not good in the short run for LandAmerica," he said.
The company, he said, is out of compliance with its loan agreements. Last night's statement did not address whether LandAmerica had received waivers from its lenders.
"If they aren't able to get the waivers, this leaves the company in pretty serious jeopardy," Dwelle said. "It seemed to me the lenders were willing to give the waivers provided the deal with [Fidelity] went through. It was unclear what the response would be if they decided the deal didn't go through."
Putting together a merger probably was the best alternative for LandAmerica. "It is uncertain what LandAmerica will see as its best next alternative," he said.
Combining the two companies would have provided Fidelity with significant market share.
In 2007, the two companies controlled 46.3 percent of the market, according to a Fidelity filing with the Securities and Exchange Commission.
"What they were trying to do was create a major, major force in title insurance and a change in the landscape," Baranoff said.
Title-insurance companies nationwide are suffering because of the decline in the real estate market. LandAmerica is no different.
LandAmerica reported a third-quarter loss of $599.6 million, or $39.45 per share, compared with a loss of $20.8 million, or $1.28 per share, in the same period a year ago.
On Nov. 3, the company laid off 120 employees at its corporate headquarters.
LandAmerica stock closed yesterday up 40 cents at $4.34, but it is down 50 percent since the deal was announced.
Between Nov. 11 and Nov 14, specialty insurer Markel Corp. sold 782,001 shares of LandAmerica stock, reducing its stake to 3.98 percent from 9 percent, according to SEC filings.
Contact Gregory J. Gilligan at (804) 649-6379 or ggilligan@timesdispatch.com.
Contact Emily C. Dooley at (804) 649-6016 or edooley@timesdispatch.com.
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