City Bank repeats 'poison pill' warning

By John Duchemin
Advertiser Staff Writer

CB Bancshares, target of a hostile takeover attempt by local rival Central Pacific Bank, yesterday repeated a warning that Central Pacific's effort to force a vote on the takeover would have dire consequences.

CB Bancshares says Central Pacific is close to triggering a shareholders' rights plan, or "poison pill," a last-ditch defense against takeovers that would flood the market with CB Bancshares stock, severely diluting the power of shares held by Central Pacific and its allies. CB Bancshares said Central Pacific would trigger the pill if it successfully forces a June 26 meeting of CB Bancshares stockholders.

Central Pacific did not directly deny CB Bancshares' allegation, but accused the target bank of subverting its own shareholders' wishes. It said CB Bancshares is writing a "new and sad chapter in the history of corporate governance."

The dispute is the latest round of acrimony since Central Pacific announced its $275 million hostile bid on April 16. It comes after CB Bancshares shareholders voted on Wednesday to reject the Central Pacific attempt.

But that vote was preceded by a Central Pacific-led boycott and more than half of shareholders refrained from voting. CB Bancshares won with the backing of only 29.4 percent of its shareholder base.

Central Pacific, which claims the support of a majority of CB Bancshares shareholders, wants to hold a second vote June 26 to consider a slightly revised offer. The would-be buyer claims the May 28 meeting was illegitimate.

Central Pacific could get a June 26 meeting if it can persuade or force CB Bancshares' board to approve the date.

CB Bancshares, however, does not want a second vote, and the poison pill threat is seen as an attempt to scare Central Pacific into backing off. On Wednesday, within hours of the original vote, CB Bancshares claimed its poison pill would be triggered by the June vote, because of the way Central Pacific sought support from shareholders.

Central Pacific said it has the voting support of more than 25 percent of CB Bancshares shareholders. Voting support is a form of "beneficial ownership," CB Bancshares said — and any beneficial ownership above 20 percent means the poison pill would be released.

Central Pacific "must now face the consequences of its ill-advised efforts" to call for the vote, CB Bancshares said in a statement yesterday.

Reach John Duchemin at jduchemin@honoluluadvertiser.com or 525-8062.