26
Broadway, 23rd Floor
New
York,
NY 10004
Phone:
(212) 269-5800
Facsimile:
(212) 269-2675
Email:
stilwellgroup@aol.com
February
11, 2008
Dear
Fellow Shareholder,
The
board
of directors is recommending that we vote to sell our Company for $28 per share.
I am recommending that we vote against this proposed deal.
During
the past decade investment funds I manage have been either the largest or one
of
the largest shareholders in three of the four major professional liability
companies that trade on a national stock exchange, and either I or one of my
representatives has sat on the board of directors of each of those three
companies. Based on my experience, I am convinced that the proposed $28 buyout
of SKP is inadequate.
As
one of
the directors stated after the SKP board agreed to the proposed $28 offer,
the
board was more familiar with The Doctors Company, and even though there were
higher offers, this was the one they felt most 'comfortable' with. As a
professional investor and as SKP's largest shareholder, I believe they made
a
serious mistake.
While
SKP's board and management didn't directly spell out the highest offer that
they
have so far declined to accept, a little detective work with the proxy materials
shows the basic outline of that offer.
On
page
19 of SKP's proxy statement, American Physicians Capital, Inc. ("ACAP") is
identified as the bidder that eventually makes the highest offer for SKP, as
acknowledged on page 26 of their statement. In the cover letter of my proxy
statement filed on February 4, 2008, ACAP's offer is described as a
fixed-exchange ratio share offer, a fact undenied by SKP. In fact, on page
26 of
SKP's proxy statement, ACAP's proposal is said to be in the form of stock
consideration, and no mention is made of cash consideration—hence, it is an
all-stock offer. Also on page 26, the formula is given by which the exchange
value is to be determined. Using the previously mentioned formula of a twenty
trading-day volume-weighted average sales price, one finds that the ACAP value
on October 15th
was
$39.74. Further on page 26, it states that the value using that formula as
of
October 15th
was $28
per share. Hence,
rounding to the nearest 1/100th
of a share results in a fixed exchange ratio of 0.70 shares of ACAP for each
share of SKP. This
is
consistent with the SKP proxy statement (page 26) that the value of the ACAP
offer was actually higher than $28 based on the spot closing price on the day
the board accepted The Doctors Company $28 per share offer. (They certainly
'explained' the highest offer in an opaque manner, didn't they?)
If
we
approve our Company's sale to The Doctors Company, the SCPIE franchise will
probably be folded into The Doctors Company and disappear. Our physicians will
have one less choice for their professional liability needs, many of our
employees will lose their jobs, and we will no longer have the opportunity
to
participate in our Company's success. If, however, the board selects the ACAP
offer—either before the vote or after, should the proposal be voted down—SCPIE
will remain a viable insurance provider in California. We will own a share
of a
larger, a more diversified, and, I am certain, a better-run professional
liability insurer.
So,
if
you prefer to receive a lower price for your shares, to see the SCPIE insurance
company be absorbed by The Doctors Company, and to owe taxes on those cash
proceeds, you should support the board's recommendation.
However,
| · |
If
you would rather receive a higher price, vote against the proposed
offer.
|
| · |
If
you would like to participate in the future upside of a well-managed
professional liability insurer, vote against the proposed
offer.
|
| · |
If
you would prefer not to be forced to pay taxes on your capital gain
in
SKP, vote against the proposed offer.
|
| · |
And, if you would prefer that our gem of an insurance
company continues its long tradition of excellence for our doctors,
vote
against the proposed offer. |
| |
|
|
| |
Sincerely, |
|
|
|
| |
|
/s/
Joseph Stilwell |
| |
|
| |
Joseph Stilwell |
On
February 4, 2008, the Stilwell Group (the “Group”) filed with the Securities and
Exchange Commission (the "Commission") a definitive proxy statement in
connection with the March 26, 2008 special meeting of stockholders of SCPIE
Holdings Inc. On the record date for the meeting, February 4, 2008, there were
9,583,165 shares of common stock of SCPIE Holdings Inc. outstanding. Copies
of
the Group’s definitive proxy statement were mailed to stockholders beginning
February 8, 2008. Investors and security holders are urged to read the Group’s
definitive proxy statement and additional definitive soliciting material because
they contain important information. Investors and security holders may obtain
a
free copy of the definitive proxy statement and other documents filed by the
Group with the Commission at the Commission's website at www.sec.gov. The
definitive proxy statement and these other documents may also be obtained for
free by writing to Mr. Joseph Stilwell at 26 Broadway, 23rd Floor, New York,
New
York 10004, or by contacting Morrow
& Co., LLC at
800-662-5200.