Another Nashville public company to go private

Just three years after IPO, insurer sells out to pair of major private equity firms in $628 mil deal

The sojourn of Nashville insurer Direct General Corp. in the public equity markets has come to an end after only three years.

In a deal announced this morning, private equity firms Texas Pacific Group and Fremont Partners will pay $432.4 million in cash and will assume almost $200 million in debt to buy Direct General, which provides non-standard auto insurance to consumers. The total value of the deal is some $628.2 million.

The sale price compares favorably to the $145 million Direct General and its shareholders raised in an initial public offering floated in August 2003. Founder Bill Adair and his family sold some shares then and more later, but the Adairs remain the majority owners of the company and will be the primary beneficiaries of the transaction.

Adair is a veteran of the insurance industry in Memphis. He, wife Jacqueline and daughter Tammy stand to reap more than $128 million in the buyout.

The purchasers are offering $21.25 per share for Direct General, a premium of 28.71 percent over its closing price of $16.51 yesterday. The stock opened more than 25 percent higher this morning and was trading at $20.70 as of 9:15 a.m.

The company announced it will stop paying its quarterly dividend after the upcoming December 15 payment.

Baker, Donelson, Bearman, Caldwell & Berkowitz served as legal advisor to Direct General, while a special committee of the board that reviewed the deal retained Minneapolis-based Dorsey & Whitney as counsel. SunTrust Robinson Humphrey was the financial advisor for the special committee.