fight heats up
Central Pacific Bank tries to
force City Bank shareholders
to meet as a proxy fight looms
Central Pacific Financial Corp. has stepped up the heat on CB Bancshares Inc. as it attempts to take over the company.
The parent of Central Pacific Bank, rebuffed in previous attempts to negotiate a $291 million merger with City Bank's parent, delivered a letter and information statement to CB Bancshares this morning requesting a special shareholders meeting.
CPF also filed papers today with the Securities and Exchange Commission in a prelude to an anticipated proxy fight for shares of CB Bancshares.
By taking advantage of a special provision in Hawaii's Control Share Acquisitions Statute, CPF will force CB Bancshares to set a date for a special meeting within five days of the request, or Saturday at the latest in this case. The meeting must then be held within 55 days of the request, or any time between Sunday and June 22.
CPF said it then hopes to purchase a majority of CB Bancshares' stock, excluding the 2.27 percent that it already owns, and exert pressure on CB Bancshares' board to support the merger and terminate the company's poison pill.
The poison pill is an anti-takeover defense that makes it more expensive for a potential suitor to buy the company.
Unlike a tender offer, which generally involves only cash, CPF's cash-and-stock proposal to CB Bancshares' shareholders is called an exchange offer. If CB Bancshares objects to the offer, it could send its own proxy material to shareholders and wage a proxy fight. CPF's merger bid for CB Bancshares is regarded as a control share acquisition under the state statute.
Clint Arnoldus, chairman, president and chief executive officer of CPF, said he is taking these steps to give CB Bancshares' shareholders the opportunity to meet and vote on whether CPF should proceed with the acquisition of shares.
"The CB shareholders have a right to vote on this offer and deserve a forum to express their views," Arnoldus said in a statement today.
CB Bancshares spokesman Wayne Miyao, who confirmed receipt of the letter, said the bank will release a statement later this afternoon after reviewing the information.
"We are disappointed that Mr. Arnoldus has chosen to rush the process," he said. "We feel we want to do our best in studying the proposal and not making any judgment without proper analysis, and consideration of the interest of our shareholders, our customers, our employees and the communities that we serve."
Ronald Migita, president and CEO of CB Bancshares, previously has voiced his displeasure about the aggressive manner in which he says Arnoldus has pursued the deal. Migita has said CB Bancshares officials and advisers were thoroughly studying the proposal and would get back to CPF as quickly as possible. However, Migita also said the review could take "weeks or months."
"Unfortunately, CB has been unwilling to discuss this offer with us in a meaningful way," Arnoldus said. "The shareholders of our two companies cannot be asked to wait indefinitely for the CB board of directors to make a decision."
Although CPF still needs approval of 75 percent of CB Bancshares' 3.9 million outstanding shares to get the merger approved, CPF hopes to initially sidestep that approval in a two-step process.
The first step involves gaining control of the majority of shares. Then, if CB Bancshares' board refuses to go along with the majority, CPF plans to pursue legal action.
One of the possible grounds for litigation would be a breach of fiduciary responsibility by CB Bancshares' board for not adhering to the majority of shareholders. The other legal challenge would involve the validity of a provision in CB Bancshares' poison pill that only allows existing board members to decide on a merger proposal.
That provision has been held invalid in several states, although there is no precedent in Hawaii. CPF also will need 75 percent of its own shareholders to approve the merger, but there has been no known opposition to the deal from that side.
CPF's merger offer, initially valued at $285 million, or roughly $70 per share, is now worth $291 million, or $69.17 a share, based on CPF's closing stock price today of $25.41. The $69.17 offer represents a 52 percent premium above the $45.50 that CB Bancshares' stock was trading at the market close on April 15, which was the day before CPF went public with its proposal. CB Bancshares' stock closed today at an all-time high of $67.61.
Under the deal, CB Bancshares shareholders would receive $21 in cash and 1.8956 shares of CPF stock for each share of CB Bancshares stock they own.
CPF also has filed the necessary papers with federal and state regulators to begin the process for the merger. Approval is expected between 60 and 90 days.
The special meeting was able to be called by CPF due to a provision in the Hawaii Control Share Acquisitions Statute relating to prospective purchasers.
The provision allows a purchaser who is going to engage in a control share acquisition to call a meeting without any minimum ownership requirement. This can be accomplished by delivering an information statement to the targeted company.
Normally, it takes 10 percent of the shares under the statute to call a meeting, while CB Bancshares' bylaws require 25 percent. If CPF had been unable to call the meeting, it could have legally challenged CB Bancshares' 25 percent requirement since it exceeds the number required by the statute.
Central Pacific Bank