By Anurag Kotoky

BANGALORE, Nov 7 (Reuters) - Fidelity National Financial Inc , one of the largest U.S. title insurers, agreed to buy smaller rival LandAmerica for about $126 million in stock as the title insurers seek to consolidate amid an industry slump triggered by a worsening housing crisis.
Shareholders of LandAmerica Financial Group, the No.3 title insurer, will receive 0.993 shares of Fidelity common stock for each share held, the companies said in a statement.
The deal represents a premium of about 74.5 percent based on LandAmerica's closing price of $4.75 on Thursday.
LandAmerica shares soared as much as 79 percent to $8.49 in pre-market trade. Fidelity National shares rose as much as 8 percent.

"The unprecedented credit freeze and depressed real estate market have negatively impacted our business to the point that it has become increasingly difficult for LandAmerica to remain an independent public company," LandAmerica's Chief Executive Theodore Chandler said.
Glen Allen, Virginia-based LandAmerica on Wednesday postponed the release of its third-quarter results sending its shares down as much as 35 percent on Thursday.
Title insurers, who protects home buyers and lenders against claims and legal fees should a dispute over ownership arise, have taken a hit as the worsening housing crisis resulted in lower demand for and lower prices on homes, cutting into their revenue.
Jacksonville, Florida-based Fidelity National posted a $198.3 million third-quarter loss in October, after setting aside $261.6 million in reserves. It also halved its dividend and announced 1,000 job cuts and an across-the-board 10 percent pay cut.
In July, LandAmerica posted a wider-than-expected quarterly loss and slashed its dividend by 83 percent.
The proposed combination, on a proforma basis, had more than 46 percent market share of the title insurance industry, the companies said in a news release.
The deal will reduce the combined debt of the companies by about $250 million before the merger closes. Fidelity, however, does not expect any material change from its current debt to total capitalization ratio of about 30 percent.
Fidelity estimates about $150 million in operational cost synergies throughout the combined operations, Chairman William Foley said.
LandAmerica's Chandler will join Fidelity's board of directors as vice chairman on completion of the merger.
Through Thursday, LandAmerica shares had fallen more than 85 percent year-to-date while Fidelity National is down 43 percent.

(Editing by Dinesh Nair) Keywords: LANDMAERICA/TAKEOVER FIDELITY (anurag.kotoky@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: anurag.kotoky.thomsonreuters.com@reuters.net)

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