NEW YORK - Sovereign Bancorp's top executive defended the Wyomissing, Pa., holding company's unusual lawsuit against its chairman, saying the legal move was necessary to protect shareholder interests.
Chief executive officer Jay S. Sidhu last week instructed attorneys for Sovereign to bring suit against chairman Frederick J. Jaindl, two other directors, and others.
The suit alleged a range of improprieties, including failure to disclose efforts by that group to take control of the company by expanding the board, and then to seek to arrange for its sale.
Mr. Jaindl, Sovereign's largest shareholder with an 11.4% stake, has disputed the charges, attributing the dispute to a power struggle on the company's board.
Hasn't Decided to Sell
Mr. Sidhu also challenged assertions by Mr. Jaindl that the company had recently received specific overtures from two other large bank companies, which Mr. Jaindl has declined to identify publicly.
While stressing that the board hasn't decided to sell the company, Mr. Sidhu added that the company "is constantly talking to people," including parties that could include prospective suitors.
"We are committed to maximizing shareholder value," he said.
"It's been a smoothly functioning machine, with a strong strategy and good teamwork," said Thomas O'Donnell, savings and loan analyst with Prudential Securities Inc.
"That's why this lawsuit is such a big surprise."
Size Has Tripled Since '91
Under an aggressive strategy of acquiring other regional thrifts, Sovereign has more than tripled in size since 1991, to $4.3 billion of assets and 79 offices from $1.3 billion and 23 offices. Sovereign operates primarily as Sovereign Bank, with offices in eastern Pennsylvania and southern New Jersey.
The Sovereign Bancorp litigation depicts chairman Jaindl as a "sophisticated investor" who over the past two decades has taken major stakes in a handful of Pennsylvania banking companies and then pressured for board seats, board control, and, in some cases, changes in ownership.
Since acquiring nearly 10% of Sovereign in 1987, Mr. Jaindl has maintained in federal disclosure statements that he had purchased his shares for "investment purposes" only, the suit contends.
Actions Versus Words
However, the suit alleges that Mr. Jaindl's actions contradicted his stated intentions. Among other contentions, the suit alleges that Mr. Jaindl met several times this year with bank officials and fellow directors to discuss selling the bank.
Mr. Jaindl is also alleged to have met and shared confidential financial information about Sovereign with the head of mergers and acquisitions for a major Pennsylvania bank.
He also is alleged to have called a surprise special meeting of Sovereign's board last month to propose expanding the board and hiring an investment bank to initiate the sale of the company.
