An investor in PMA Capital filed a lawsuit in Pennsylvania State Court on behalf of current investors PMA Capital Corporation (NASDAQ:PMACA) alleging breaches of fiduciary duty by the PMA Capital Corp. board of directors for selling PMA Capital Corp. too cheap to Old Republic Corp.
PMA Capital Corporation, located in Pennsylvania, PA, is a holding company whose operating subsidiaries provide insurance and fee-based services.
On Thursday, June 10, 2010, PMA Capital Corporation (NASDAQ:PMACA) and Old Republic International Corporation (NYSE:ORI) and announced that the companies have entered into a merger agreement pursuant to which Old Republic International Corporation will acquire all of PMA Capital Corporation's outstanding common stock. Under the terms of the agreement Old Republic International Corporation will issue 0.55 shares of Old Republic International Corporation common stock in exchange for each outstanding common share of PMA Capital Corporation. Depending on the price of Old Republic International Corp's common stock preceding the closing of the merger, the exchange ratio may be adjusted upwards or downwards, but will not exceed 0.60 or be less than 0.50. According to PMA Capital Corp. the agreement has been approved by its board of directors and the initial exchange ratio represents a premium of approximately 15% to the closing price of PMA Capital Corporation's common stock on June 8, 2010, the last trading day before the signing of the merger agreement.

But according to the complaint the defendants breached their fiduciary duty by selling PMA Capital Corp for an inadequate and unfair price through an unfair process. Shares of PMA Capital Corporation (PMACA) traded before the news on June 09, 2010, at $6.11, and $6.37 per share on Monday, June 07, 2010. In response to the announcement PMACA shares increased in the pre-market on Thursday, June 10, 2010, to $.6.84 per share. But PMACA stock traded at $7.54 per share on May 12, 2010, and PMACA shares are down from its 52weekHigh of $7.65 per share, over $10 per share in 2008, over $11 per share in 2007, and the analyst target price currently values the company at $9.50 per share.