An aggressive major shareholder in First California Financial Group has threatened to move to oust the company’s board after the bank rejected a buyout offer from PacWest Bancorp.
New York-based Basswood Capital Management, which said in a regulatory filing that it owns 5.2 percent of the common stock of First California, issued the sternly worded letter on May 10 after Westlake Village-based First California rejected a $7.25 per share buyout offer from PacWest, parent of Pacific Western Bank. The all-stock offer represented a 32 percent premium over First California’s May 3 closing price.
In the letter to the board, Basswood partner Matthew Lindenbaum said rejection of the offer “causes us grave concern and, in our view, is simply old fashioned entrenchment at work and is not consistent with your fiduciary duties.”
In announcing that it had rejected the unsolicited offer, First California said May 9 that it had asked for more information about the proposed deal, but that PacWest would not enter into a non-disclosure agreement or provide more details unless the Westlake Village-based bank signed an exclusivity agreement that would prevent it from talking to other potential buyers.
First California CEO and President C.G. Kum told the Business Times in a May 9 interview that he had asked PacWest executives for more time to consider their offer. His company received the offer on May 3 with a deadline to reply by May 8, he said. “I called the CEO [Matt Wagner] and asked him for a one-week extension to process this request properly. I was summarily rejected,” Kum said. “The phone conversation ended with him saying you either sign by the deadline or we’re going to go public. It’s a pressure tactic.”
Los Angeles-based PacWest has signaled that it now wants to enlist the energy of disgruntled First California shareholder to help push through a deal. Basswood Capital is one of three investor groups who in recent months have put pressure on First California’s leaders to improve the outlook for shareholders. The Pohlad banking family of Minnesota and Castine Capital Management of Boston have also been leaning on First California’s management to look at the firm’s low stock price and consider their options. Together, the three groups own close to 20 percent of First California.
Castine Capital said in May 14 regulatory filings that it had lowered its stake in First California from 5.1 percent to 2.6 percent.
In his letter to the board, Lindenbaum of Basswood Capital said his firm was “disappointed” to learn that First California had “stonewalled discussions with PacWest Bancorp.” He called the Westlake Village company’s reasons for doing so a “flimsy excuse.”
“We urge you to begin discussions with PacWest immediately, or to undertake a sale process if you believe that is a better way to maximize value for stockholders. In light of the PacWest proposal, it is simply unacceptable to ‘just say no’ and deny FCAL’s stockholders the opportunity to realize a substantial premium for their shares.”
Lindenbaum’s letter concluded with a stern warning to the board. “Make no mistake about it: if you continue down the path of ignoring the best interests of FCAL’s stockholders, we intend to take all necessary action to ensure that your stonewalling does not cause harm to us and our fellow stockholders,” he wrote. “If you fail to do what is right for stockholders, we will not hesitate to begin the process of calling a special meeting to remove the FCAL Board. It is our fervent hope that such a costly and distracting measure will not be necessary.”[Click here to read previous coverage of PacWest’s buyout offer to First California.]