City Bank shareholders
told to reject CPF mergerThe proxy says that Central Pacific
has no obligation to protect
shareholders' interests
A day after a state court allowed a meeting to consider the hostile takeover of City Bank by rival Central Pacific Bank to proceed, the parent company of City Bank mailed its shareholders proxy materials urging them to reject the merger.
CB Bancshares Inc. is holding the meeting for shareholders to vote on a proposal to allow Central Pacific Financial Corp. to acquire a majority of CB Bancshares outstanding stock. Approval of the control share acquisition proposal would make it easier for CPF to take control of City Bank.
CB Bancshares said it sent the proxy materials by overnight delivery to its shareholders informing them that the meeting is set for 8 a.m. May 28 in the Lanai Ballroom on the second floor at Dole Cannery.
Shareholders can mail in their voting cards or vote at the meeting.
Although CPF initially asked for the special meeting, the company filed a motion in state Circuit Court last week seeking a temporary restraining order and preliminary injunction to halt the meeting because it said May 28 was too early to allow shareholders enough time to receive the material, study it and mail it back. CPF also argued that there was nothing to vote on at the meeting because it subsequently made a new offer and asked for a June 26 meeting.
Circuit Court Judge Victoria Marks, however, rejected Friday the TRO request that would have halted the proxy process for 10 days and effectively canceled the May 28 meeting. She did, though, set a date Thursday to hear arguments on CPF's motion for a preliminary injunction that still could halt the meeting if CPF prevails. In the meantime, the rejection of the TRO cleared the way for both banks to proceed with the proxy process.
CPF, which has not sent out its proxy material yet, said there was nothing to vote on at the May 28 meeting because it had rescinded its request asking for the meeting due to a new offer it made to CB on May 9.
The new offer changes the allocation of CPF stock and cash from 70 percent stock and 30 percent cash to 65 percent stock and 35 percent cash. The value of the offer, based on Friday's $27.68 closing price of CPF stock, is $73.23 per CB share.
CB said there was no reason to cancel the May 28 meeting because the May 9 offer was a modification of the previous one, and shareholders could make their decision based on the modified offer.
CB Chairman Lionel Tokioka and Ronald Migita, president and chief executive officer of CB, sent a letter along with the proxy material yesterday.
In the letter Tokioka and Migita said the offer was financially inadequate, raises significant competitive concerns, would result in the elimination of approximately 10 bank branches and CB's California loan production office, and likely could result in the layoffs of more than 200 employees. CB also said the merger of the banks poses substantial execution risks because CB claims that Clint Arnoldus, chairman, president and CEO of CPF, and his management team lack the experience and expertise to integrate the two banks.
"In spite of our request to Central Pacific that it honor and accept your board's decision, Central Pacific has decided to pursue its ill-advised takeover attempt," Tokioka and Migita said.
"Remember," the letter said, "Central Pacific has absolutely no obligation to protect your interests. Your board, on the other hand, is keenly aware of its fiduciary duties and is committed to doing the right thing for CB Bancshares."
CB said it wants to remain independent because it is well positioned to take advantage of growth opportunities it believes will enhance shareholder value.
Among the accomplishments CB cited were its stock price appreciation of 124 percent over a three-year period prior to CPF's initial offer, more than 15 percent compounded annual growth in earnings per share over the last five years, and improvements in the bank's loan portfolio and efficiency as reasons to keep CB independent.