Irvine’s Fidelity National Submits Bid for Giant Group

IRVINE — Title insurance company executive William P. Foley II made an unsolicited, $49-million bid Thursday for Giant Group Ltd., setting the stage for a possible proxy fight with Beverly Hills businessman Burt Sugarman.

Foley’s offer intensifies an already bitter confrontation between two Southern California businessmen who are known to share a penchant for bruising proxy battles.

Foley has acquired 14.75% of Giant Group’s outstanding shares in recent months. Sugarman, Giant Group’s chairman, responded by filing lawsuits against Foley and adopting a “poison pill” shareholder package designed to kick in if Foley’s stake in Giant Group hit 15%.

Foley, chairman of Irvine-based Fidelity National Financial Inc., described his goal as a “friendly, negotiated transaction,” but said he won’t rule out a proxy fight if the deal isn’t accepted by a Feb. 21 deadline.

A spokesman for Giant, which controls Rally’s hamburger chains and once owned two cement companies, declined to discuss Foley’s latest move.

In a letter delivered Thursday to Sugarman, Foley offered about $12 per share worth of Fidelity National common stock for each share of Giant Group that it doesn’t already own.

Giant shares fell 37.5 cents to $10, after hitting a 52-week high of $10.875 earlier in the day. Fidelity slipped 25 cents to $17.25. Both stocks trade on the New York Stock Exchange.

Giant, which operates out of a Beverly Hills office building, has a 47% stake in Kentucky-based Rally’s, a 500-unit drive-through chain that has struggled to turn a profit in recent quarters.

Restaurants such as Rally’s are, “to be conservative, a troubled concept,” said Ron Paul, president of Technomic Inc., a Chicago-based consulting firm. “The appeal of their value-oriented menus has eroded dramatically since the late 1980s.”

Foley has fast-food connections--he’s also chairman of Anaheim-based CKE Restaurants, which owns the Carl’s Jr. chain. But he apparently is looking past the Rally’s burger chain to an estimated $50 million in cash, tax benefits and receivables that Giant Group has accumulated by buying and selling businesses.

Giant executives would not discuss the company’s balance sheet, but Fidelity National Vice President Andrew Puzder described Giant Group as “an undervalued asset.”

Sugarman, 56, made his name and money in the entertainment industry, producing the hit television show “Midnight Special,” and several movies, including “Children of a Lesser God.” He’s married to “Entertainment Tonight” co-host Mary Hart.

Associates say that Sugarman prefers to keep his name out of the news, but in recent years he has generated headlines outside of Hollywood with deals ranging from cement plants and media companies to vacuum cleaner bags and hamburger chains.

In the mid-1980s, he failed to complete a hostile bid for a Los Angeles-based aerospace parts manufacturer. Sugarman also abandoned an acrimonious $1.7-billion takeover attempt during the 1980s of Media General, a Richmond, Va., company that owns newspapers and television stations.

In 1991, Sugarman paid nearly $620,000 in fines to settle Securities and Exchange Commission charges that he failed to follow SEC reporting requirements while amassing 47% interest in the Louisville-based Rally’s chain.

Foley also has made a name as a hard-nosed businessman. He has used a string of acquisitions to make Fidelity National the nation’s fifth-largest title insurance company. In the process he became known as the “Bruce Lee” of the title insurance industry.

Last year, he abandoned a hostile bid for U.S. Facilities Corp., a Costa Mesa-based insurance company.

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Conquering the Giant

Fidelity National Financial has intensified its efforts to gain control of Beverly Hills-based Giant Group Ltd. Details on the two firms and key events in the takeover bid:

Fidelity National Financial

Business: Title insurance

Headquarters: Irvine

Chairman: William P. Foley II

1994 revenue: $492.8 million

Giant Group Ltd.

Business: Holding company owning 47% of Rally’s Hamburgers Inc.

Headquarters: Beverly Hills

Chairman: Burt Sugarman

1994 assets: $71.7 million

KEY EVENTS

1995

* Dec. 8: Fidelity National Financial purchases 8.4% of Giant Group stock and announces plans to buy more.

* Dec. 19: Giant files suit against Fidelity Chairman William P. Foley II, accusing him of insider trading and violating securities rules by forming a secret group to purchase Giant’s shares.

1996

* Jan. 4: Giant Group adopts “poison pill” to fend off takeover bid. Shareholders may opt to purchase more shares at deep discount if a potential buyer acquires more than 15% of Giant common stock.

* Jan. 9: Fidelity increases its stake in Giant to 10.5%.

* Jan. 19: Fidelity increases stake to 14.75%.

* Feb. 15: Foley announces takeover bid, informs Giant chairman Burt Sugarman he will wage a proxy battle if necessary to acquire Giant.

Source: Times reports, Bloomberg Business News; Researched by JANICE L. JONES / Los Angeles Times