Will Investor Push Astoria to the Block?

By Rieker, Matthias | American Banker, May 4, 2005 | Go to article overview

Will Investor Push Astoria to the Block?


Rieker, Matthias, American Banker


Astoria Financial Corp. of Lake Success, N.Y., is under fire from PL Capital LLC, a fund manager that has pushed nine of 11 targeted thrifts to sell since 1996.

PL Capital claims its interest in Astoria is limited to blocking a stock compensation plan up for a vote on May 18.

"This is not a proxy fight," Richard Lashley, one of PL Capital's two principals, said in an interview Tuesday. Mr. Lashley said he could not discuss a potential acquisition of Astoria, or broader management issues at the company because such comments could legally be construed as a proxy battle.

But Astoria is often seen by Wall Street as an attractive acquisition target particularly in the wake of recent consolidation among other New York-area thrifts, and its proposed compensation plan could result in substantial payouts for management in the case of a sale.

"The timing happens to raise some eyebrows," said Anthony R. Davis, an analyst with BankAtlantic Bancorp's Ryan Beck & Co. Other investors are likely to question this compensation proposal, Mr. Davis added.

In its April 11 proxy statement, Astoria asked shareholders to approve giving employees 5.25 million shares worth $131 million. The plan includes 3.8 million new shares and 1.5 million shares still outstanding from a previous options plan.

The $23.3 billion-asset company said that just over 2,000 of its employees and officers are eligible to participate in the plan, though last year only 68 executives were granted options based on performance.

Mr. Lashley, whose Chatham, N.J., company manages $150 million of assets, owns 766,950 shares, or just 0.7% of Astoria's outstanding shares. Total shares made available to employees through 10 stock allocation plans since Astoria went public in 1993 amount to 37% of outstanding shares, he said.

"This is simply a case of excessive and unnecessary shareholder dilution for a management team that is already more than adequately compensated," Mr. Lashley wrote in a letter to Astoria shareholders on April 20.

The salary and bonus of George L. Engelke Jr., Astoria's chairman, president, and chief executive officer, totaled just over $2 million last year, according to the company's proxy. He received options for 397,500 shares, or 20% of the total number of options granted to employees, at a price of $26.63 per share. And he is the beneficial owner of 3.6 million of the company's shares.

In light of Astoria's already generous executive compensation, the issue of additional option grants "boils down to the question, When is enough enough?" said Ryan Beck's Mr. Davis. "I am not doubting that Mr. Engelke has been instrumental in the success of the company, but it is a question of proportions."

But in its proxy proposal, Astoria argued that the plan to raise compensation is fair, particularly in light of the company's performance. …

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