Franklin Mutual Launches Proxy Fight Against Mercer's Demutualization

Franklin Mutual Insurance Co. has launched a proxy fight to defeat the Plan of Conversion of Mercer Mutual Insurance Co. (Pennington, NJ) which Franklin president, George H. Guptill, Jr. has labeled as "unfair" to Mercer policyholders.

In its proxy solicitation, Franklin urges policyholders to vote against the Mercer Plan because it takes away policyholder rights and privileges without payment of cash or stock. Policyholders will have to buy back their interest in the new company with their own money, Franklin contends.

Franklin made a proposal to Mercer's Board of Directors in March 1998 that Franklin purchase all the shares of Mercer by paying in cash at least $23.2 million directly to Mercer policyholders.

"Mercer has twice rejected our proposal which would pay on average more than $500 to each policyholder for each policy owned," Guptill said. "As a policyholder of Mercer, Franklin objects to Mercer's Plan because it would give nothing of value to policyholders while providing free stock and potential stock incentives and bonuses to the management of Mercer. Our proposal compensates policyholders but does not provide these lucrative rewards to Mercer management."

Guptill said that he has received hundreds of comments from Mercer policyholders. Last week he received a letter from Thomas Grillo, former New Jersey Deputy Insurance Commissioner and a Mercer policyholder, opposing Mercer's Plan. Grillo wrote, "Mercer executives have conveniently forgotten (or what they have apparently chosen not to tell the policyholders) is that a mutual insurance company is owned by its policyholders. It is not owned by a small group of company executives whose sole motivation is to enrich themselves by taking the property of the policyholders/owners."

"As a Mercer policyholder, I will vote against the Plan and I encourage all Mercer policyholders to also vote against Mercer's demutualization Plan," he concluded.

Mercer has called a special meeting of policyholders for Mar. 3, 1999 to vote on its Plan.

"We plan to fight this demutualization to the end and will be at that meeting with our proxies to vote against its adoption," Guptill said. "We are hoping that our fellow Mercer policyholders will not let Mercer executives expropriate their interest in the company for their own gain, and that they will send a strong message to Mercer's management to consider Franklin's proposal by defeating the Mercer Plan."