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Mortgage Insurers Agree To Abandon $5 Billion Buyout

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The Associated Press

Published: September 6, 2007

MILWAUKEE - Mortgage insurer MGIC Investment Corp. abandoned its $5 billion bid to buy rival Radian Group on Wednesday, saying it was in each other's best interest to concentrate on surviving in the faltering mortgage industry.

Radian had vowed to see the deal through when MGIC announced in August that it wanted to back out. But Radian Chief Executive Officer S.A. Ibrahim said Wednesday that Radian did not want to fight and instead needed to weather 'an industrywide scramble to survive.'

Investors seemed hopeful for both companies after news of the mutual agreement. Though Radian's shares tumbled as much as 9 percent after the market opened Wednesday, they closed up 16 cents at $18.27. MGIC shares fell 29 cents to close at $30.05.

MGIC, based in Milwaukee, had agreed in February to pay about $5 billion in stock for Radian, valuing its shares at $60.78. The day the deal was announced, shares of MGIC closed at $70.09. As problems mounted in the mortgage market, both companies saw their shares tumble and the deal's value sink.

MGIC said it did not think it had to complete its purchase of Philadelphia-based Radian because their joint interest in subprime mortgage investor C-Bass LLC could be worthless.

The decision to end the deal was mutual, both companies said. Neither party paid each other to get out of the agreement, according to a news release. The original agreement said there would be no breakup fee if a decision was mutual.

Both companies' shareholders had approved the deal, which MGIC had said would close in early October.

But woes felt throughout the mortgage industry made the deal a difficult one to finish, said Michael Zimmerman, an MGIC vice president. He said his company, the leading mortgage insurer, will continue to expand in the United States and look for growth overseas. He said the crisis won't be fully felt for at least the next few years as high-risk loans made in the past few years falter.

Ibrahim, Radian's CEO, said he does not foresee another MGIC buyout in the future. His company is too busy now trying to stay afloat, he said. He predicted Radian will survive and not go the way of failed subprime players BNC Mortgage LLC, owned by Lehman Brothers Holdings, and Capital One Financial Corp.'s GreenPoint subsidiary.

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