NEW YORK - Republic New York Corp. gained some support Monday for its unusual hostile takeover bid for Green Point Savings Bank.
Several depositors at the mutual institution, based in the New York borough of Queens, filed a class-action lawsuit seeking to force Green Point's trustees to let them vote next month on Republic's offer.
Management Power at Issue
The acquisition proposal, which became public last weekend, highlights controversial issues of depositors' rights and management's power at mutual savings institutions.
Republic asserts it can legally make a $100 million "special interest payment" to depositors of Green Point as part of a proposed merger-conversion transaction.
Green Point contends the offer is illegal in New York State and essentially a bribe. Its management plans to proceed with a December initial public offering of 53.7 million shares of stock.
Each side charged that windfall profits would accrue to the other if their rival mutual-to-stock conversion routes were pursued.
Green Point chairman Thomas S. Johnson, formerly president of Manufacturers Hanover Corp. and Chemical Banking Corp., asserted a merger-conversion with Republic would be "detrimental to our depositors' financial interests."
$700 Milhon Stock Offering
The lawsuit was filed in New York State Supreme Court, Queens County, by the law firm of Milberg, Weiss, Bershad, Hynes and Lerach.
Besides the interest payment, Republic in its proposal would raise $700 million from a stock offering and invest the proceeds in Green Point.
Lawyers and Wall Street banking analysts said Republic, with no way of officially approaching Green Point's depositors, is relying on the "public route" to force management to address its offer.
"It's basically a trial balloon," said a lawyer. "They're hoping to stir up things, raise the issue of |fiduciary duty,' and put pressure on the trustees" of the thrift.
In a letter to Green Point, Republic president Jeffrey C. Keil complained that previous efforts to communicate with Green Point's management resulted in letters unanswered, messengers rejected, and fax machines "disconnected in the middle of a transmission."
"We are confident that our proposal is clearly superior to the stand-alone conversion presently being pursued by your institution," he wrote. The thrift is expected to offer its shares at from $11.10 to $15.
"We are also confident," Mr. Keil said, "that before you make the most important decision in the 125-year history of Green Point you owe it to each of your constituencies to consider fully our proposal."
In an interview Monday, Mr. Keil said the telephones at Republic were "ringing off the hook" with inquiries from Green Point depositors wanting to know how they could vote on Republic's offer.
State Regulator's Assurance
Mr. Keil said the New York State Banking Department had assured him in a letter that the special interest payment was possible. He compared it to the $10 million payment made to depositors of Williamsburg Savings Bank when the Brooklyn thrift was acquired by Republic.
But going public with news of the bear hug is risky on Republic's part, some say, in light of feelings by thrift depositors elsewhere that merger-conversions are not good deals for them.
In Chicago, for instance, depositors at Avondale Federal Savings Bank asked the Office of Thrift Supervision Friday for a public hearing about that thrift's planned merger-conversion with Central Resource Group, a subsidiary of Central Life Assurance Co., Des Moines.
Republic's legal standing to establish a special payment fund for Green Point depositors also arouses skepticism.
