MGIC Investment (MTG) - Get Free Report and Radian Group (RDN) - Get Free Report called off their merger, citing a "mutual agreement that current market conditions have made combining the companies significantly more challenging."
The mortgage insurers had agreed in February to merge in an all-stock deal then valued at $4.7 billion, creating a leading credit risk manager. But shares of both companies have since plunged, as the market for mortgage securities has collapsed under the weight of rising defaults and delinquencies on recent-vintage loans to homebuyers with poor credit histories. MGIC and Radian have been hurt by the subprime mess because the policies they write pay out when loans go bad.
The partnership turned rancorous last month, when MGIC told regulators that it didn't believe it was obliged to complete the merger, given the sharp decline in the companies' business, including a writeoff of a $1 billion subprime investing venture. Radian said it disagreed. MGIC then sued Radian to compel it to disclose additional information, a move Radian fought.
On Wednesday, the companies said that their lawsuits against each other will be withdrawn and that no payments were made to end the deal.
Curt Culver, MGIC Investment's CEO, said, "I am pleased MGIC and Radian were able to reach this amicable resolution. During the course of the merger process, our MGIC team met many fine people from Radian. We wish them the best."
S.A. Ibrahim, Radian Group's CEO, said, "Our mutual decision to terminate the pending merger represents the best outcome for both companies under the circumstances. We wish MGIC and its employees well."