Magazine article American Banker

N.Y. State: Hostile Bid by Republic 'Unlawful.' (Acquisition of Green Point Savings Bank by Republic New York Corp.)

Magazine article American Banker

N.Y. State: Hostile Bid by Republic 'Unlawful.' (Acquisition of Green Point Savings Bank by Republic New York Corp.)

Article excerpt

NEW YORK -- The state banking regulator has ruled that Republic New York Corp.'s hostile takeover offer for Green Point Savings Bank is "unlawful and improper," virtually dooming the deal.

Republic maintained Thursday that it would keep pursuing Green Point, the nation's largest mutual thrift, with $5.7 billion in assets.

Door Nearly Closed

But observers said the bid now faces extremely long odds. They added it is increasingly likely that the Brooklyn thrift's board of trustees will be able to go ahead with a plan to convert to stock ownership through an initial public offering that could raise $800 million or more.

New York State's superintendent of banks, Derrick D. Cephas, told Republic Wednesday evening that it had "no authority" to make a merger-conversion offer to Green Point's down positors after being turned down by the trustees.

In particular, he said, Republic's offer of a $100 million "special interest payment" to depositors -- later raised to $250 million -- is not allowable.

Such a deal would have been extremely lucrative to Republic, which would pay far less than Green Point's estimated market value of more than $800 million.

The regulator appeared to leave a door ajar that could let Republic influence depositors when they vote next month on the thrift's plan to convert to stock ownership.

In a detailed "interpretive statement" of the state's policy regarding conversions by mutuals, Mr. Cephas said:

"A depositor desiring to solicit proxies in connection with the Green Point plan of conversion may obtain financing or funding from Republic or from any other interested person so long as the source of such financing is disclosed, along with the fact that Republic is interested in the outcome of the vote."

He further said Green Point must comply within 48 hours after getting an authentic request from any depositor for a complete list of the institution's depositors.

But lawyers said that the wording leaves Republic with little hope of forcing takeover talks.

"If the superintendent created a loophole, it's for a mouse and not a multibillion-dollar bank," said Michael L. Ryan, a bank lawyer at Cleary, Gottlieb Steen and Hamilton. "And he has made it clear that Green Point does not have to deal with Republic now or in the future."

Pledge of Legality

Republic responded Thursday to the state regulator in a carefully worded statement:

"We have been advised by our de legal counsels that two outside legal counsels that our proposal and manner of approach, particularly given our responsibilities as a publicly traded company, are legal. …

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