City Bank shareholder
calls board irresponsibleBruce Sherman owns shares in
CB Bancshares and Central Pacific
One of CB Bancshares Inc.'s largest shareholders blasted the bank's management and board of directors yesterday as "irresponsible" for turning down a merger offer from Central Pacific Financial Corp.
Bruce Sherman, who controls a combined $54.5 million worth of stock in the two banks, also criticized the merger rejection in a letter to another CB Bancshares shareholder that was filed yesterday with the Securities and Exchange Commission. The letter was addressed to Banc Funds Company LLC, which owns 5 percent of City Bank's parent.
Sherman, chief executive officer of Naples, Fla.-based Private Capital Management, said in his filing that CB Bancshares' board has used "subjective and fear-inspiring tactics to sway shareholder and public opinion with sound bites rather than address the objective fundamentals of the proposed offer."
On the other side of the debate, Richard Lim, president and chief operating officer of City Bank, accused Central Pacific Bank's parent of using similar tactics during a Monday news conference. Lim said CB Bancshares' employees have been "terrorized" at the possibility of losing their jobs and that customers have been equally put off by the actions of Central Pacific CEO Clint Arnoldus.
"We received hundreds of calls and the response has been very negative," Lim said. "One woman in Hilo said that Arnoldus' bullying tactics was like a stink style of doing business. A man in Wahiawa summed it up by saying, 'Who do they think they are?' And another customer may have hit it right on the head when he said, 'Bigger is not necessarily better.' Some people even wanted to start a petition."
Private Capital Management, according to yesterday's SEC filing, has increased its stake in CB Bancshares to 5.4 percent from about 5 percent at the end of last year and slightly lowered its Central Pacific ownership to 9.5 percent from just under 10 percent at year-end. Private Capital Management owns 209,039 shares of CB Bancshares stock worth about $14.2 million and about 1.5 million shares of Central Pacific shares worth $40.3 million.
Sherman, who stands to benefit financially if the merger goes through, said in a telephone interview that "shareholders will openly hold directors and management responsible for long-term outcomes."
"It's totally irresponsible when a 50 percent premium offer is put on the table for management and the board of directors not to act responsibly," Sherman said.
In his SEC filing, Sherman said he had not consulted with the board or management of either bank in connection with the communication to Banc Funds.
His filing comes one day after Ton Finance, CB Bancshares' largest shareholder with an 8.9 percent stake, said in a statement it did not support a "hostile" takeover. Ton, which previously committed its shares to vote for the deal, said it wanted to remain passive and sought the long-term best interest for CB Bancshares' shareholders. However, it said it wouldn't renege on its voting agreement with Central Pacific.
Meanwhile, CB Bancshares spokesman Wayne Miyao said the bank didn't want to speculate on the reasons for Sherman's filing.
"We respect his decision, and we'll be talking to him and other shareholders to tell our side of the story," Miyao said.
Both banks recently have been taking out full-page newspaper advertisements to state their positions. CB Bancshares has began using radio spots as well.
Both banks also will be sending proxies to shareholders asking them to support their respective positions in a special May 28 shareholders meeting. The purpose of the meeting, which CPF requested CB Bancshares to call under Hawaii law, will allow shareholders to vote on whether Central Pacific can acquire a majority of CB Bancshares' shares.
"I think it's obvious that CB Bancshares has not even sat down and discussed this offer with Central Pacific, and I'm a big believer in corporate governance and shareholder rights," Sherman said in the phone interview. "I assume that when the initial offer was made public at a reasonable premium that all companies would be responsive to their shareholders."
Sherman said in the filing that Private Capital Management is urging shareholders to support the CPF proposal and cites as its reason increased operating efficiencies, value recognition and broader product offerings and services that can benefit Hawaii.
"I've been a successful bank investor for 20 years and chairman and CEO of financial institutions myself," he said in the phone interview. "I think it's totally irresponsible, since the stock market votes every day by its share price, that when someone offers you a 50 percent premium for you company, that you don't strongly consider a transaction.
CB Bancshares said in rejecting the merger that it would cost 200 bank employees their jobs as well as eliminating 500 positions outside the banks.
Sherman, however, said regardless of the potential job losses that CB Bancshares' management and the board should have met with Central Pacific.
"These are businesses," he said. "They get bought and sold all the time. I've been an investor for a long time and I don't think there's a separate Hawaii standard for management's legal and moral responsibilities.
"I just think entrenched shareholders may sometimes win the battle but lose the war. And my belief is that's what could occur here."