Fidelity National Ends Effort to Gain Control of Giant

IRVINE â€”  Fidelity National Financial Inc., stymied in another hostile takeover effort, said Monday that it has ended its bid for cash-rich Giant Group Ltd.

The halt in the four-month public battle came after Beverly Hills-based Giant Group agreed to buy back at a premium the 14.9% stake that Fidelity had accumulated. The Irvine title insurer also will buy a small portion of a fast-food company in which Giant holds a 48% interest.

The agreement also ends lawsuits that each side had filed against the other. The accusations took on personal tones with a defamation claim that Fidelity’s chairman, William P. Foley II, had leveled against Giant and its chairman, former Hollywood producer Burt Sugarman.

Executives at both companies said the settlement was amicable.

Fidelity’s takeover bid was driven by a desire to share in $50 million in cash, tax benefits and receivables that Giant Group had accumulated, according to documents the Irvine title insurer filed earlier this year with the Securities and Exchange Commission.

But Foley halted the effort and settled because he believed that Sugarman was willing to exercise stock options that would make it financially impossible for Fidelity to complete its proposed acquisition.

“If push came to shove,� said Andrew F. Puzder, Fidelity’s general counsel, “it was apparent that Burt Sugarman could have and would have exercised his options.�

Fidelity had started buying Giant Group stock late last summer as it was ending a bitter 18-month battle for US Facilities Corp., a Costa Mesa medical and casualty insurer that had spurned the unwanted suitor.

According to terms of the agreement, Giant Group will buy back 705,489 shares of its stock that Fidelity had acquired. Fidelity, which paid $7.80 per share on average, will receive $8.625 per share, for a gain of about $582,000.

In addition, Giant Group, which holds a 48% stake in Rally’s Hamburgers Inc., agreed to sell to Fidelity a 4.9% stake in the Louisville, Ky., restaurant chain.

In a related transaction, Giant sold an additional 15% of Rally’s stock to CKE Restaurants Inc., the Anaheim parent company of the Carl’s Jr. burger chain.

Foley, who also is CKE’s chairman, said the Rally’s acquisition puts CKE and Fidelity National in position to share in a planned turnaround at Rally’s. The 600-unit chain has been hammered in recent months by stiff competition from McDonald’s and other national burger chains.

The Carl’s Jr. and the Rally’s chains hope to lower operating costs by blending some support functions such as purchasing, Christensen said, and might experiment with joint restaurants that would sell menu items from both chains. Foley and C. Thomas Thompson, CKE’s president, also will join Rally’s board of directors.

Fidelity’s stock closed Monday at $13.25 a share, down 25 cents, and Giant’s stock fell $1.125 a share to close at $7.50. Both are traded on the New York Stock Exchange.