BRADENTON, Fla., Oct. 24, 2013 /PRNewswire/ -- (NASDAQ: "DGICA"
and "DGICB") – Gregory Mark Shepard
today blasted CEO Don Nikolaus and
the Boards of Directors of Donegal Group Inc. ("Donegal Group") and
Donegal Mutual Insurance Company ("Donegal Mutual") for rejecting
his proposed amicable transaction. He calls on both Boards to
exercise their fiduciary duty and not "kow-tow" to Mr. Nikolaus'
desire to control Donegal Group and Donegal Mutual as his personal
fiefdom. He calls on other shareholders of Donegal Group to
let their voices be heard. Mr. Shepard's amicable proposal
was filed on October 7, 2013 and is
available in Mr. Shepard's 13D/A #18 at www.sec.gov.
Mr. Shepard blasted the Boards of Donegal Mutual and Donegal
Group for failing to adequately consider Mr. Shepard's October 7, 2013 proposal. According to Mr.
Shepard: "These Board members really need to be reminded that
their fiduciary duties under law are to the Donegal Group
shareholders to maximize the value of the Donegal Group
shares. Simply put, Mr. Nikolaus business plans just aren't
successful for the Donegal Group shareholders; Mr. Nikolaus' plans
only work for Mr. Nikolaus and his friends on the Boards, as
witnessed by the gigantic and highly dilutive stock option
increases over the last 5 years."
According to Mr. Shepard, "By my calculations, during the 5
years between 2007 and 2012, Donegal Group's a) book value grew by
a total of 13.4% or a meager 2.7% per year; b) book value per
outstanding shares grew by a total of only 12.2% or 2.4% per year;
c) but stock options grew by an astounding 181% or 36.2% per year;
and d) fully diluted book value grew by a total of only 7.9% or
1.6% per year.
Mr. Shepard further notes that Donegal Group's Investor
Presentation titled "Pursuing Effective Business Strategy in
Regional Insurance Markets" to "Achieve Book Value Growth By
Implementing Plan" dated September 20,
2013 and filed with the SEC, makes no mention of the
substantial dilution of Donegal Group's shareholders as a result of
the extraordinarily high number of options granted to Donegal Group
insiders and employees relative to industry peers. This
Investor Presentation was filed as Exhibit 99.1 to Donegal Group's
Form 8-K on September 20, 2013, and
is available at www.sec.gov.
Mr. Nikolaus called Mr. Shepard's offer illusory because, among
other things, Mr. Shepard has not yet obtained "all of the
regulatory approvals necessary for you to purchase any additional
shares of [Donegal Group] common stock." Mr. Shepard calls
this: "ridiculous and absurd, and the sure sign of a
desperate man. If Mr. Nikolaus hired any financial advisor
worth his salt, Mr. Nikolaus would learn that regulatory approvals
are frequently obtained after an amicable transaction has been
agreed to, or during the negotiation process." Mr. Shepard
continued: "This process has really suffered from each Board
not hiring credible investment banks to advise them, but instead
relying on the advice of lawyers. I call on each Board to
hire an investment bank of national standing to properly advise
them." In any event, Mr. Shepard's regulatory applications to
purchase additional shares are pending with the regulators.
Mr. Shepard calls on Mr. Nikolaus to resign and step down from
all positions at Donegal Mutual and Donegal Group. "Mr.
Nikolaus is hopelessly conflicted between his focus on his
thirty-some year career, his standing with his employees, his place
in the community, his duties to the Donegal Group shareholders, and
his duties to the Donegal Mutual policyholders," according to Mr.
Shepard. Furthermore, Mr. Shepard asserts, "Mr. Nikolaus'
stale business strategy has failed to produce acceptable
results for Donegal Group's long-suffering public
shareholders, who from September
30, 2006 to September 30,
2013 were forced to watch their Class A stock price decline by
31% from $20.22 to $13.99 per Class A
Share and their Class B stock price rise by a paltry 8% from
$18.02 to $19.49 per Class B Share,
while during the same period outstanding stock options increased by
181%."
The release is not intended to and does not constitute (i) a
solicitation of a proxy, consent or authorization for or any
special meeting of Donegal's stockholders or (ii) a solicitation of
a consent or authorization in the absence of any such meeting.
SOURCE Gregory Mark Shepard