Bank dispute in court
Central Pacific Bank and
City Bank are at odds over the
date of a shareholders meeting
A Circuit Court judge said today she will make a ruling tomorrow on whether to grant Central Pacific Financial Corp. a temporary restraining order and preliminary junction to stop a CB Bancshares Inc. shareholders meeting that has created a firestorm between the two banks.
Judge Victoria Marks, who heard arguments this morning from CPF attorney Crystal Rose and CB attorney Bert Kobayashi, took the matter under advisement and will rule at 8:30 a.m. tomorrow.
CPF, continuing the legal maneuvering that has epitomized its hostile merger attempt, filed a lawsuit yesterday seeking to stop the May 28 meeting called by acquisition target CB Bancshares.
The parent of Central Pacific Bank asked the court to declare the meeting in violation of Hawaii law, find the meeting moot because CPF's first offer to CB was withdrawn, and stop CB Bancshares from soliciting shareholder proxies for that May 28 meeting. CPF has called for a June 26 meeting instead.
Rose argued there is nothing to vote on at the May 28 meeting because CPF has presented CB with a new offer and that to allow CB to solicit shareholders for that meeting would be confusing since CPF has called a June 26 shareholders meeting. She said the two scheduled meetings would mean that shareholders would get four proxies -- one from each bank for each meeting.
Kobayashi argued, though, that CPF's new offer, which is comparable to the original offer but changes the cash and stock allocations, is simply a modification of the previous offer and that the May 28 meeting should stand. He said any confusion that has been created is from CPF's own doing and that the meeting controversy is having a disruptive effect on CB's customers, accounts and operations.
He also argued that the May 28 date is within the parameters called for under state law and is a date previously agreed to by Clint Arnoldus, CPF's chairman, president and chief executive offer.
The lawsuit against CB involving the May 28 meeting is the second suit seeking a temporary restraining order. A CB shareholder, Barbara Clarridge, filed a class-action suit about two weeks ago. That hearing is scheduled for May 23.
CB spokesman Wayne Miyao said CPF continues to bully CB's board and management to accept the merger proposal.
"We believe this is another attempt by Mr. Arnoldus to force his will on CB Bancshares Inc. and all of our constituencies," Miyao said. "There's adequate time to keep all the shareholders informed. We would still like to maintain the May 28 date."
The purpose of the meeting is to vote on CPF's proposed acquisition of a majority of CB's outstanding shares.
Meanwhile, CB sent a letter to its employees yesterday denouncing CPF's release of a January 2000 internal memorandum that talked about the benefits of a potential merger between Central Pacific and City Bank.
CB referred to that proposed merger as exploratory and said the banks had a "conceptual discussion."
"Central Pacific wasn't interested," CB President and CEO Ronald Migita said in yesterday's letter. "We, at City Bank, honored their decision and nothing else happened except for a memo to the file. ... As a matter of business ethics, we kept our promise (to keep the memo confidential)."
However, that memo was leaked to the media earlier this week and yesterday full-page newspaper ads appeared in Honolulu's two major dailies talking about that merger and criticizing CB for the stance it is taking now about CPF's current proposal.
In another development, an investment banking firm released an analysis through CPF yesterday showing that CB's stock, which has soared 58.5 percent this year, likely would need four years to regain its current levels if the merger falls through.
But CB Chief Financial Officer Dean Hirata said the report's 2003 earnings-per-share estimate of $3.76 is lower than the $5.33 estimate used by CPF at an April 16 investor presentation.
Hirata declined to provide any earnings guidance but said he wouldn't give any credibility to the analysis.
Kathleen Smythe, managing director of Keefe, Bruyette & Woods in San Francisco, said if CB falls back to its pre-offer price of $45.50, the parent of City Bank would need to grow at 11.8 percent a year in order for its stock to reach $70.41 in 2007. Smythe has no business affiliation with Arnoldus or CPF.
Hirata disputed the finding, saying KBW's estimate would equate to a stock price of $64.
"Clint Arnoldus is either lying to Wall Street or he's lying to the public by continuing to provide false and misleading information to the press," he said.