|IberiaBank’s Daryl Byrd, who initiated buyout talks with Whitney, lost out in a December bidding war with Hancock.|
And some of those shareholders are not pleased with how the deal ultimately went down. As a group of out-of-state Whitney shareholders moves forward with a federal lawsuit against Whitney based on claims that its execs did not act in shareholders’ best interests, further analysis of the deal reveals that Whitney’s shareholders aren’t the only ones feeling shortchanged.
Filings with the U.S. Securities and Exchange Commission disclose that Whitney, Louisiana’s largest bank, was in negotiations with another unnamed banking company — now confirmed to be Lafayette-based IberiaBank — for more than three months before accepting the 11th hour bid from Hancock.
IberiaBank offered a slightly higher price per share than Hancock, though a Wall Street merger consultant told The Times-Picayune Iberia’s proposal was only marginally better — roughly 6 percent “more attractive” for Whitney shareholders.
But the potential for Whitney to sell was not the brainchild of Whitney or Hancock; it was IberiaBank that aggressively pursued the deal from Sept. 7 until Hancock’s offer was accepted by Whitney and announced Dec. 22, according to a play-by-play by Nick Gorski of SNL Financial Services, a Virginia-based financial information firm.
In fact, Whitney’s board members on Dec. 1 decided against extending their “For Sale” sign to other companies fearing corporate leaks and on advice from JPMorgan that a sweeter offer probably didn’t exist. Hancock’s name was never in play — until Whitney CEO John Hope III received a call from Hancock days after the board opted not to shop around.
The last-minute switch to Hancock, coupled with what the litigating Whitney shareholders are calling a lack of information from Whitney and a “breach in fiduciary duty to shareholders,” are some of the key arguments listed in a potential class-action filed Feb. 7 against Whitney and Hancock by Realistic Partners, a group of Whitney shareholders.
Randy Smith, an attorney representing Realistic Partners, says the lawsuit is seeking class-action status based on a “commonality of interest” for shareholders. Whitney has a month to respond to the suit before court motions can progress.
The lawsuit seeks both injunctive relief — to block the merger — and unspecified damages for the shareholders who claim that Hope “sought to protect and advance his own interests at the expense of Whitney’s public shareholders.” (See related story below.)
Smith directed questions about the number of shareholders in the suit and how many shares they collectively own to New York-based lawyer Richard Brualdi, who is assisting with the case. Brualdi did not return phone calls and emails requesting comment.
Despite the pending litigation, the required two-thirds of Whitney’s shareholders and the majority of Hancock’s shareholders are expected to approve the merger when they vote on it in late March. The deal would lift Hancock-Whitney’s assets to $20 billion, about 80 percent higher than the assets of IberiaBank.
IberiaBank declined comment for this story.
Although it is said to be steaming over the loss of a longtime rival and how the negotiations played out, IberiaBank is still sitting pretty — on a heap of excess capital SNL Financial says it will likely deploy on expansions into other southeastern states like the Carolinas, Georgia and Florida.
A time line on IberiaBank’s months-long negotiations to acquire Whitney illustrates just how far the two companies had come in their talks before Mississippi-based Hancock mysteriously lunged in days before a potential Iberia-Whitney deal was struck.
• Sept. 7, 2010 - IberiaBank CEO Daryl Byrd contacts Whitney CEO John Hope III to request a meeting about a merger.
• Sept. 22, 2010 - Whitney board members direct Hope to tell IberiaBank they were not interested at the time, but IberiaBank continues courting.
• Nov. 8, 2010 - The two companies enter a nondisclosure agreement amid negotiations after an employee issue between the two banks was resolved in October.
• Dec. 1, 2010 - Whitney board members decide against shopping for better offers from potential buyers.
• Dec. 14, 2010 - IberiaBank raises its offer; Whitney receives an “unsolicited” call from Hancock a few days later.
• Dec. 19, 2010 - Whitney informs Iberia of the other interested buyer.
• Dec. 21, 2010 - Iberia and Hancock both submit their final offers.
• Dec. 22, 2010 - Hancock and Whitney announce their merger.
Source: Nick Gorski of SNL Financial