SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
DONEGAL GROUP INC.
(Name of Issuer)
Class A Common Stock
Class B Common Stock
(Title of Class of Securities)
Class A: 257701201
Class B: 257701300
(CUSIP Number of Class of Securities)
Gregory M. Shepard
7028 Portmarnock Place
Bradenton, FL 34202
(309) 310-1331
(Name, address and telephone number of persons authorized to receive notices and communications on behalf of person(s) filing statement)
November 7, 2012
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-l(b)(3) or (4), check the following box ¨.
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
| Class A CUSIP No. 257701201 and Class B CUSIP No. 257701300 | ||
| (1) |
Name of reporting person S.S. OR I.R.S. IDENTIFICATION NOS. OF REPORTING PERSON
Gregory M. Shepard | |||||
| (2) | Check the appropriate box if a member of a group
(a) ¨ (b) ¨
| |||||
| (3) | SEC use only
| |||||
| (4) | Source of funds
PF | |||||
| (5) | Check if disclosure of legal proceedings is required pursuant to Items 2(d) or 2(e)
¨ | |||||
| (6) | Citizenship or place of organization
United States of America | |||||
|
Number of shares beneficially owned by each reporting person with |
(7) | Sole voting power
Class A 3,602,900; Class B 397,100 | ||||
| (8) | Shared voting power
-0- | |||||
| (9) | Sole dispositive power
Class A 3,602,900; Class B 397,100 | |||||
| (10) | Shared dispositive power
-0- | |||||
|
(11) |
Aggregate amount beneficially owned by each reporting person
Class A 3,602,900; Class B 397,100 | |||||
| (12) |
Check if the aggregate amount in Row (11) excludes certain shares
¨ | |||||
| (13) |
Percent of class represented by amount in Row (11)
Class A 17.96%; Class B 7.12% | |||||
| (14) |
Type of reporting person
IN | |||||
Page 2 of 4
SCHEDULE 13D
| ITEM 1. | SECURITY AND ISSUER. |
The Schedule 13D filed with the Securities and Exchange Commission on July 12, 2010 (the “Initial 13D”) by the Filing Person with respect to the Class A Shares and Class B Shares of Donegal Group Inc., a Delaware corporation (the “Issuer”), is hereby amended to furnish the additional information set forth herein. All capitalized terms contained herein but not otherwise defined shall have the meanings ascribed to such terms in the Initial 13D.
| ITEM 3. | SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. |
| ITEM 3 | OF THE INITIAL 13D IS HEREBY AMENDED TO ADD THE FOLLOWING: |
The Filing Person owns 3,602,900 Class A Shares and 397,100 Class B Shares purchased for $51,924,532 and $6,639,668, respectively (including commissions). The source of funding for the purchase of these Shares was personal funds.
| ITEM 4. | PURPOSE OF TRANSACTION |
| ITEM 4 | OF THE INITIAL 13D IS HEREBY AMENDED TO ADD THE FOLLOWING: |
On November 5, 2012, the Filing Person submitted the following shareholder proposal to be presented and voted upon at the Issuer’s 2013 Annual Meeting of Shareholders:
RESOLVED: That the shareholders of DGI, assembled at the annual meeting in person and by proxy, hereby request that the Board of Directors immediately engage the services of an investment banking firm to evaluate alternatives that could enhance shareholder value including, but not limited to, a merger or outright sale of DGI, and the shareholders further request that the Board take all other steps necessary to actively seek a sale or merger of DGI on terms that will maximize share value for shareholders.
A copy of the shareholder proposal and its supporting statement are attached hereto as Exhibit 7.1.
The Filing Person intends to review his investment in the Issuer on a continuing basis. Depending on various factors including, without limitation, the Issuer’s financial position, results and strategic direction, price levels of the Class A and Class B Shares, the Issuer’s response to the actions suggested by the Filing Person, actions taken by management and the Board of Directors of the Issuer, other investment opportunities available to the Filing Person and capital availability and applicable regulatory and legal constraints, conditions in the securities and capital markets, and general economic and industry conditions, the Filing Person may, from time to time and at any time, in the future take such actions with respect to his investment in the Issuer as he deems appropriate including, but not limited to: communicating
Page 3 of 4
with management, the Board, other stockholders, industry participants and other interested or relevant parties (including financing sources and financial advisors) about the Issuer or proposing a potential or other transaction involving the Issuer and about various other matters, including the operations, business, strategic plans, assets and capital structure of the Issuer or one or more of the other items described in subparagraphs (a)-(j) of Item 4 of Schedule 13D; requesting or proposing one or more nominees to the Board of Directors of the Issuer; purchasing additional securities of the Issuer in the open market or otherwise; entering into financial instruments or other agreements that increase or decrease the Filing Person’s economic exposure with respect to his investment in the Issuer; and/or engaging in any hedging or similar transactions with respect to such holdings. The Filing Person reserves the right to change his current plans and intentions with respect to any and all matters referred to in Item 4 of Schedule 13D based on any of the foregoing factors or otherwise or to sell or distribute some or all of his respective holdings in the Issuer, at any time and from time to time, in the open market, in private transactions or otherwise.
| ITEM 7. | MATERIAL TO BE FILED AS EXHIBITS. |
7.1 Shareholder Proposal and Supporting Statement
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.
| DATED: November 7, 2012 |
| /s/ Gregory M. Shepard |
| Gregory M. Shepard |
Exhibit Index
7.1 Shareholder Proposal and Supporting Statement
Page 4 of 4
Exhibit 7.1
SHAREHOLDER PROPOSAL AND SUPPORTING STATEMENT
Shareholder Proposal:
Gregory M. Shepard, 7028 Portmarnock Place, Bradenton, FL 34202, who beneficially owns 3,602,900 Class A shares and 397,100 Class B shares of Donegal Group Inc. (“DGI” or the “Company”), submits the following proposal:
RESOLVED: That the shareholders of DGI, assembled at the annual meeting in person and by proxy, hereby request that the Board of Directors immediately engage the services of an investment banking firm to evaluate alternatives that could enhance shareholder value including, but not limited to, a merger or outright sale of DGI, and the shareholders further request that the Board take all other steps necessary to actively seek a sale or merger of DGI on terms that will maximize share value for shareholders.
Supporting Statement:
You are urged to vote “Yes” for this proposal for the following reasons;
I believe that the Company’s growth plans are outdated, without focus, unrealistic, and competitively disadvantageous, and have both failed and fallen behind industry norms causing stock analysts and investors to lose faith and interest in the Company’s prospects, precipitating a decline that is unlikely to reverse itself without the Company merging or being sold to a larger insurer with different management, stronger financial resources, a broader spread of risk and a better track record of providing a reasonable return to shareholders.
DGI has not been successful in delivering a positive return for its shareholders. On October 31, 2012, DGI’s Class A and Class B stock prices were, respectively, 36% lower and 4% higher than six years earlier. On October 31, 2006, DGI’s Class A stock price was $20.31 per share and DGI’s Class B stock price was $17.67 per share.
As the owner of approximately 18.0% and 7.1%, respectively, of the Class A and Class B shares of DGI, I believe the Company’s shares trade at a substantial discount to their realizable value if the Company combined with another insurer. Examples of such realization of value include the 1998 Nationwide-ALLIED combination (74% premium over pre-announcement share price), the 2001 State Auto-Meridian combination (135% premium over the share price immediately before American Union’s tender offer, and the 2012 Nationwide-Harleysville combination (137% premium over share price five business days preceding announcement).
As a committed investor in DGI, my focus is for the Company to enhance value for its investors. Based on the aforesaid examples, no amount of rate increases, fortuitous avoidance of catastrophic storms, or other operational improvements can unleash realization of the Company’s shares’ true value as would a merger or sale of the Company to another insurer.
Therefore, I believe that the greatest value to the shareholders will be realized through a merger or sale of the Company. The Board should take advantage of the market for financial institution consolidation and low interest rates by immediately seeking out opportunities to merge into a larger and more competitive insurer or find an opportunity for shareholders to sell their stock to a larger and more competitive insurer. A vote for this shareholder proposal would benefit all shareholders.