Liberte prices rights offering to fund USAuto acquisition

Dallas-based Liberte Investors today announced details of its planned rights offering.

Dallas-based Liberte Investors (LBI) today announced details of its planned rights offering. Proceeds from the offering will fund Liberte’s acquisition of USAuto, the Nashville-based parent of Acceptance Insurance Agency.

When the Securities and Exchange Commission declares Liberte’s offering registration effective, the company will distribute to stockholders one subscription right per share of common stock. Stockholders then can purchase 0.61 shares of common stock for each subscription right a price of $4 a share. Liberte said 12,559,552 shares of the company’s common stock would be issued in connection with the rights offering.

In early December, Liberte announced that it would pay roughly $157 million in cash and stock to acquire USAuto Holdings. The merged company will be called First Acceptance Corp. and will relocate its corporate headquarters to Nashville.

As previously announced, Liberte will acquire 100 percent of the stock of USAuto for $76 million in cash and 13.25 million newly issued shares of Liberte. The cash portion will be financed by the proceeds of this new equity issuance and existing cash. The new company’s chief executive officer will be Stephen Harrison, who has been CEO of USAuto, and its executive vice president will be USAuto Chief Operating Officer Thomas Harrison. Gerald J. Ford, a former banker and Liberte’s chairman and 45 percent stockholder, will remain chairman. Liberte CEO Donald Edwards will remain a director and enter into a four-year advisory relationship with the Company.

USAuto Holdings provides non-standard consumer automobile insurance, including that offered by its Acceptance Insurance Agency unit. Among its local owners are Jim Ayers and Joe Russell.

Liberte was founded in 1969 and at one time was a real estate investment trust. In subsequent years, it incurred large losses and converted from REIT status. Liberte presently is a shell company with a $58 million cash balance and net operating loss carryforwards. At June 30, 2003, the company had NOLs for federal income tax purposes of approximately $223 million. According to a recent 10-K filing with the SEC, since August 1996, “the company has been actively pursuing opportunities to acquire one or more operating companies in order to increase value to existing stockholders and provide a new focus and direction for the company.” The board brought in Edwards, a Chicago resident, to assist in that effort.