Magazine article American Banker

Sovereign's Share Price Falls as Top-Officer Feud Worsens

Magazine article American Banker

Sovereign's Share Price Falls as Top-Officer Feud Worsens

Article excerpt

Shares of Sovereign Bancorp, a highly regarded Pennsylvania thrift, slumped Thursday as an unusual public feud between its chairman and president over the possible sale of the company intensified.

Sovereign's stock, which surged last fall on takeover speculation, was off as much as 75 cents a share at one point Thursday. It closed at $12.875, off 37.5 cents.

The drop followed the filing of a lawsuit by Sovereign chairman Frederick J. Jaindl, charging the thrift's president, Jay S. Sidhu, with breach of duty and violations of federal securities and banking laws.

Mr. Jaindl is a prominent bank stock investor who owns an 11.4% stake in Sovereign, which is based in Wyomissing, Pa., near Philadelphia.

Mr. Sidhu, whose own suit against Mr. Jaindl last month caused the bitter dispute to become public, is among the country's most respected thrift managers.

The dispute is the most vivid example yet of large shareholders' urging that financial institutions consider selling out as the trend to consolidation in the banking and thrift industry continues.

"There is no way to view this as positive," said Elizabeth A. Summers, banking and thrift analyst at Ryan, Beck & Co., West Orange, N.J., who has a "hold" rating on the stock.

Walkout Feared

"At best, there is going to be expensive litigation and a diversion of the management's time and energy," she said. "For a stock trading on earnings, that could have significant consequences.

"In the worst-case scenario, Jay Sidhu walks out. That would have to be regarded as a major blow," she added.

Another analyst, Samuel J. Beebe of Robert W. Baird & Co., said Mr. Sidhu should be ranked "at the top" among thrift managers and compared with the industry's best at thrifts like Golden West Financial Corp., Oakland, Calif.

The ultimate result of the fight, Ms. …

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