City Bank launches grassroots campaign
By David Butts
Advertiser Staff Writer
City Bank, battling to stop Central Pacific Bank's hostile takeover bid, has launched a grassroots campaign to convince state regulators not to approve the merger.
The campaign, more akin to a political contest than most bank mergers, has City Bank asking customers to sign petitions, getting employees to write letters to state legislators and running radio advertisements promoting its position.
"Just come into any City Bank branch to sign a petition," says the radio ad that City Bank said it is playing on all major stations.
City Bank hopes to generate enough interest to convince the state to hold a public hearing on the merger and eventually rule against it.
Central Pacific Financial Corp. offered to buy City Bank's parent, CB Bancshares, in April for about $270 million. The joining of the state's fourth and fifth largest banks, respectively, would create a stronger competitor for Bank of Hawaii and First Hawaiian Bank, but would also lead to some branch closures and layoffs.
The state Division of Financial Institutions must approve the merger, and Commissioner Nick Griffin will soon decide whether to hold a public hearing as part of the process.
"A transaction such as this should receive the widest possible discussion and input from the public," said Griffin.
State law says the merger should "promote the convenience, needs, and advantage of the general public." City Bank argues that closing 10 branches and laying off what it estimates would be 200 people doesn't meet that test.
City Bank says it has collected more than 2,500 signatures on petitions opposing the takeover.
Central Pacific is taking a dim view of City Bank's latest tactics.
"It's unfortunate that City Bank is resorting to such measures as pressuring their shareholders, pressuring the DFI and state legislators and creating unnecessary anxiety among their employees and customers," said Central Pacific spokeswoman Ann Takiguchi. "We hope that a fair decision will be made based on the merits of our proposal and not on emotion."
"We believe that such a combination will create a stronger institution that will ultimately benefit customers, businesses, shareholders and Hawai'i," she said.
If the merger wins state and federal regulatory approval, it still must gain the support of a majority of City Bank's shareholders. On that front, City Bank has made some progress recently.
City Bank's main shareholder, TON Finance, which controls 8.9 percent of the company's shares, agreed in writing on Friday to oppose the merger.
"TON will not cooperate with or assist Central Pacific in its efforts to acquire City Bank," according to a letter signed by Yoshiyuki Takada, a director at TON, and Ron Migita, CB Bancshare's president.
TON's move is significant.
When Central Pacific first offered to buy City Bank, it said TON, a Japanese family-owned investment firm, would vote its shares in favor of the takeover. In May, TON issued a clarification, saying it did not support a "hostile takeover." Now TON has taken the additional step of signing a letter saying it opposes Central Pacific buying City Bank.
"We feel it's huge that our largest shareholder is in support," said City Bank spokesman Wayne Miyao. Central Pacific said its attorneys are reviewing this new development.
As part of its campaign to stop state approval of the merger, City Bank sent state lawmakers letters last week urging them to lobby the state Division of Financial Institutions. One letter was signed by Migita and Richard Lim, the bank's president and chief operating officer. The other letter was signed by constituents in each of the legislators' districts.
In response to queries about the request, an attorney with the House of Representatives' minority staff office advised Republican lawmakers not to use their offices to influence what amounts to an ongoing legal case.
Daniel Mollway, executive director of the state Ethics Commission, said that in general, legislators can help constituents when they need assistance before governmental bodies. However, he said, there may be constitutional issues tied to an elected official or any individual intervening in a legal case involving two private parties.
Mollway said legislators may want to first consult with the attorney general's office.
Rep. David Pendleton, R-49th (Kane'ohe, Maunawili, Enchanted Lake), said he wrote back to the constituents explaining why he believed it would be improper to support City Bank's campaign.
Sen. Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai), said he empathizes with the City Bank position, stating that a forced merger is "against my free-market principles."
However, he said, the issue is "a private battle between private companies" and not something before the Legislature.
Griffin, the financial institution commissioner on the receiving end of City Bank's lobbying effort, seemed unmoved by the flurry of activity.
"This is essentially an administrative process," he said.
Advertiser Staff Writer Gordon Pang contributed to this report. Reach David Butts at dbutts@honoluluadvertiser.com or 535-2453.
