Major player backs City Bank takeover bid
By Andrew Gomes
Advertiser Staff Writer
The tug-of-war campaign to combine City Bank with Central Pacific Bank deepened yesterday as a top shareholder of City Bank parent CB Bancshares Inc. criticized the City Bank board for fighting the deal.
Deborah Booker • The Honolulu Advertiser
Central Pacific also said CB Bancshares' largest shareholder, TON Finance, must stand by its agreement with Central Pacific to vote in favor of the merger despite issuing a statement Monday that it did not support a hostile takeover.
City Bank employees gather in front of the Merchant Street office to express support for their board's decision to reject a hostile takeover by Central Pacific Bank.
The latest publicly expressed support appeared to build momentum for the merger, though Richard Dole, principal of the local private equity investment banking firm Dole Capital LLC, said it was impossible to tell how the dozens of large shareholders would vote at a May 28 meeting to consider combing the banks.
"It may be a pretty close judgement," he said.
Private Capital Management LP, a Florida partnership that owns stakes in both banks, filed a letter with the Securities and Exchange Commission yesterday urging other owners of CB Bancshares to support the unsolicited merger.
"PCM is most disappointed in what it feels to be subjective and fear-inspiring tactics on behalf of the (CB Bancshares) board to sway shareholder and public opinion with sound bites rather than address the objective fundamentals of the proposed offer," the company said in its letter addressed to another top CB Bancshares owner, Banc Funds Co. LLC.
"While speculation on adverse effects to the people, communities, and economy of Hawaii may make good press, the reality is that the shareholders of (CB Bancshares) are being offered a significant premium for their shares, including an investment with an established and successful (Central Pacific) management ... ," wrote Bruce Sherman, Private Capital's chief executive officer.
City Bank estimates the merger would bring result in than 200 bank job cuts and more than 500 related job losses outside the bank that would cost the local economy $16.5 million.
Sherman's letter went on to say a combined bank presented opportunity to increase operating efficiencies, products and services "which can flow through and benefit the people, communities, and economies of Hawaii." He added that CB Bancshares' board served its own interest by rejecting the proposed takeover.
Private Capital Management owns 209,039 shares of CB Bancshares, about 5 percent, and is also the second-largest shareholder in Central Pacific's parent, Central Pacific Financial Corp., with about 1.5 million shares, or roughly 10 percent of that bank.
City Bank spokesman and senior vice president Wayne Miyao said the bank respects the judgement and decisions of Private Capital and TON, but did not want to speculate or comment further.
City Bank on Monday claimed TON could not vote its shares at the May 28 meeting because of a Hawai'i law that disqualifies votes if a proxy is solicited more than 30 days before a shareholders meeting. But Central Pacific said yesterday it did not solicit a proxy from TON, so its shares can be voted.
Ann Takiguchi, Central Pacific's communications officer, also said TON continues to support a merger that creates a stronger bank for Hawai'i, and that TON is legally bound by its voting agreement.
TON, a Japanese family-owned investment firm with about 9 percent of City Bank stock, issued a statement Monday through its California attorney stating, "We do not support a hostile takeover of (City Bank parent) CB Bancshares."
Gilbert Serota, an attorney representing TON at Howard Rice Nemerovski Canady Falk & Rabkin, yesterday clarified that TON wanted its position to be viewed as neutral and not to influence other shareholders or City Bank officers and directors.
Serota added that legal counsel for TON was reviewing City Bank's interpretation of its vote being disqualified, and would express its opinion on the issue before the May 28 meeting.
Together, TON and Private Capital stakes in City Bank, along with unregistered shareholder Nanboku Sangyo — which also has voiced support for the merger — represent about 20 percent of CB Bancshares owners.
Takiguchi said Central Pacific continues to have merger support from at least 25 percent of CB Bancshares stockholders. Management and employees own about 13 percent of the company.
Central Pacific needs to win more than 50 percent of CB Bancshares voting shares to move forward with its takeover attempt.
Yesterday, CB Bancshares and Central Pacific issued preliminary proxy statements explaining their positions on the merger and asking for shareholder votes.
The upcoming vote is one of many legal and regulatory hurdles Central Pacific must clear before it can claim ownership of City Bank.
Richard Lim, City Bank's president and chief operating officer, said Monday at an employee rally that he was quite certain a prolonged legal battle would ensue and drag out the fight for control of the company.
City Bank shares gained 20 cents yesterday to close at $67.98. Central Pacific shares were up 68 cents to $26.43.
Before the takeover bid was announced, City Bank shares were trading at about $46. They have been trading in the high 60s since the bid, originally offered at $70 in stock and cash, was made public.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
