NORWICH, Vt. - The board of Fund American Enterprises Holdings Inc. has approved a cash tender offer to buy up to 500,000 of its common shares for $71 each, in an attempt to shore up the stock price.
"There has been some disappointment from shareholders," said Mike Paquette, vice president and controller for Fund American, explaining the company's actions. "Anyone that wants to sell is taking a bath."
Fund American is the parent company of Source One Mortgage Services Corp., Farmington Hills, Mich., one of the top 20 residential lenders last year.
The offer represents a premium on the company's recent trading price on the New York Stock Exchange, where the shares jumped $3.375, to $69.625, following the announcement on Tuesday.
A company spokesman said that as of Sept. 30, Fund American had 7.5 million primary shares outstanding.
Source One reported a net loss of $43.5 million for the year ended Dec. 31, 1994, largely because of a $68.1 million pretax charge because of a decline in market value of its portfolio of purchased mortgage servicing rights.
Since then, however, the company has operated profitably and recently emerged as a potential bidder for the remaining assets of Lomas Mortgage USA, the Texas-based lender now in bankruptcy proceedings.
The company said it expects to begin the self-tender on Dec. 4. If the offer begins Dec. 4, the company said it expects shareholder protection provisions to expire at midnight eastern time on Jan. 2, unless the offer is extended.
This represents an extension from the originally announced Dec. 1 start- up date, and will allow stockholders to choose between the 1995 and 1996 taxable period.
About $36 million in cash has been raised for the tender, in part by selling off a some of the company's $400 million investment securities portfolio, Mr. Pacquette said.
He does not expect the company to extend any similar offers in the foreseeable future.