An attempt to make it easier for the board of Nevada's largest independent bank to sell it backfired.
Reno-based Pioneer Bancorp.'s wanted to reduce from 80% to a simple majority the percentage of outstanding shares whose vote is required if the board wants to sell the company or make some other major corporate transaction.
The proposed amendment to the bank's articles of incorporation was designed to encourage a potential acquirer to act through the board. If the board opposed such a transaction, the supermajority vote would still have been required for an override.
The vote to approve the change came just shy of the 80% required. But as news of the amendment plan drifted out, observers thought $631 million- asset Pioneer was putting itself in play-so management called off an extension of the voting and killed the proposal.
The plan was not meant as a signal that Pioneer is for sale at any price, said president and chief executive William E. Martin. "We will continue to have maximum protection" against unwanted offers.
Pioneer was going against the flow at a time when many community banks are moving to supermajority voting and shareholder rights plans to stave off activist shareholders and hostile acquirers.
But observers and bank officials said Pioneer's existing defenses go too far, denying adequate power to the board and the shareholder majority.
Now the bank has found itself trapped by its own defenses.
About 91% of the shareholders voted on the proposal, but it received the support of only 78.5% of outstanding shares.
Bank officials decided to extend voting for another week but then backed off completely after the move generated rumors that Pioneer was for sale.
"We believe that at this point the shareholders have spoken, and we're going to have to go with the recognition that 78% was the most we could get," Mr. Martin said.
"It sounds like they painted themselves in a corner," said Doug Faucette, partner at the Washington law firm of Muldoon, Murphy & Faucette. "One needs to be wary of some of these defenses, because sometimes you can hoist yourself on your own petard."
