Central Pacific takes City Bank fight to court
By John Duchemin
Advertiser Staff Writer
Central Pacific Bank, in an escalation of the fight to buy City Bank, yesterday filed a lawsuit to prevent City Bank from holding a shareholders' meeting on the issue of a takeover.
The lawsuit is the first move into the courts by either bank as they fight for control of City Bank. Stock analysts and takeover experts have said they expect a tense battle that could become entangled in court and cost tens of millions of dollars if City Bank continues to fight the merger.
Central Pacific, which is offering $275 million in cash and stock to buy City Bank parent CB Bancshares, asked Circuit Court Judge Victoria Marks to bar CB Bancshares from holding the May 28 shareholders' meeting. Marks will consider the request at an 8 a.m. hearing today.
Central Pacific said the May 28 meeting date, called by City Bank executives to vote on the takeover bid, is too soon to give shareholders enough time to review and vote on the offer.
"We need shareholders to be able to understand what we're offering," said Crystal Rose, a Honolulu attorney and partner in the law firm Bays Deaver Lung Rose & Baba, which is representing Central Pacific in the lawsuit.
City Bank spokesman Wayne Miyao said his bank would fight the lawsuit.
"We believe this is another attempt by Mr. Arnoldus and Central Pacific to resort to the courts in an effort to force their will on CB Bancshares," Miyao said, referring to Central Pacific chairman Clint Arnoldus. "We will continue to act in the best interests of our shareholders and other constituencies and will respond to the lawsuit."
Central Pacific, which announced its intent to buy City Bank last month, claims to have won over at least 27 percent of CB shareholders with a $70-per-share buyout offer and a plan to increase revenues and cut costs at the combined bank.
But City Bank executives have rejected two Central Pacific merger offers this month, saying that the offers not only undervalue City Bank, but would harm the community by limiting competition and eliminating hundreds of jobs. Central Pacific says the combined bank would cut about 200 of the banks' combined 1,000 jobs and close 10 of the two banks' 45 branches.
The banks have lately waged an increasingly bitter public relations war, issuing statements and advertisements promoting their positions and decrying the other's tactics.
The lawsuit occurred after Central Pacific on April 28 formally requested a City Bank shareholders' meeting to vote on the takeover bid. City Bank set the meeting for May 28, the earliest possible date to hold the meeting according to the law.
Central Pacific has complained the date is too early to give shareholders enough time to consider the matter. Central Pacific must submit a "proxy statement," a government-approved document containing a voting form and prospectus of the proposed deal, to all City Bank shareholders. But Central Pacific lawyers say that the complicated process of locating all City Bank stockholders and mailing the proxies means many would not even receive the statements until after the meeting.
Further complicating the matter is that Central Pacific on May 9 submitted a revised offer, which slightly shifted the amount of cash and stock that would result from the deal. Central Pacific claims the revised offer is materially different enough that City Bank should cancel the May 28 meeting and reschedule it later.
City Bank, however, contends the offer is not different enough to warrant a new meeting. City Bank on Monday rejected the revised offer and has refused a Central Pacific request to move the meeting to June 26.
This is the second lawsuit filed against CB Bancshares since Central Pacific announced the takeover bid. On April 29, CB Bancshares shareholder Barbara Clarridge sued the bank, saying executives were illegally blocking the takeover, which would return about 50 percent on the bank's stock price before the takeover attempt was made public.
Reach John Duchemin at jduchemin@honoluluadvertiser.com or 525-8062.
