Central of Mass. Causes Stir with an Investor Deal

By Reosti, John | American Banker, September 23, 2004 | Go to article overview

Central of Mass. Causes Stir with an Investor Deal


Reosti, John, American Banker


Central Bancorp Inc.'s move to rid itself of an insurgent investor by buying its stake for an above-market price in a privately negotiated deal has angered other institutional investors and prompted at least one, Sandler O'Neill Asset Management LLC, to dump its shares of the Massachusetts company.

With the insurgent group, PL Capital LLC of Naperville, Ill., out of the picture, Central is much less likely to sell itself -- something PL Capital and some other investors have pressed it to do over the years.

Sandler, a joint venture with the New York investment bank Sandler O'Neill & Partners LP, would not disclose how many shares it owned. It sold them on the open market Monday, a week after Central bought PL Capital's 154,268 shares for $33.25 each -- 75 cents more than the market price at the time.

Terry Maltese, the president of Sandler Asset Management, said he asked the $508 million-asset Central to buy its stake for the same price it paid PL Capital, but that the bank refused.

"As a shareholder, we would have liked to have been offered the same deal," Mr. Maltese said. He called it "egregious" that a publicly traded company would offer a premium to only one investor.

"I think it's wrong to treat one group of shareholders different from another," Mr. Maltese said. "It gets worse when you find out that the ... [favored] shareholder was an insider."

Two of PL Capital's investors, Richard J. Lashley and Richard J. Fates, were on the boards of Central Bancorp and its thrift subsidiary, Central Cooperative Bank. They resigned from both Sept. 17.

Anton V. Schutz, a fund manager with Mendon Capital Advisors Corp., which owns 7.6% of Central, called its private deal with PL Capital "disgusting."

Central, of Somerville, "behaves as if it is not a publicly traded company," Mr. Schutz said. Its deal with PL Capital, he said, amounted to "misbehavior that should be attracting some attention" from regulators. Unlike Sandler, though, Mendon intends to keep its Central shares, Mr. Schutz said.

Central's biggest outside investor, Jeffrey F. Gendell, who owns 9.7% of the company, did not return a reporter's call. William P. Morrissey, Central's senior vice president, declined to comment, and Mr. …

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