The directors of Long Island Bancorp turned down a higher offer from North Fork Bancorp. because shareholders would own a majority of the company they agreed to sell to, Astoria Financial Corp.
Long Island Bancorp agreed to sell to Astoria for $71.04 per share, despite receiving an offer worth $71.81 per share from North Fork, according to documents filed last week with the Securities and Exchange Commission.
Shareholders are suing Long Island, based in Melville, N.Y., for agreeing to sell for less money than it could have gotten from another company.
One of the reasons the Long Island Bancorp board accepted Astoria's lower offer, according to the regulatory filing, was that its shareholders would own nearly 51% of the combined company. By contrast, selling to North Fork would have put only 33% of the company in the hands of Long Island shareholders.
Two institutions besides North Fork and Astoria bid for Long Island Bancorp.
One, said to be GreenPoint Financial Corp., offered $68 per share, and the other, said to be Dime Bancorp., offered $57 plus securities to reflect the value of Long Island's goodwill lawsuit against the federal government.
The Long Island board met April 2 to consider the four offers, but just before the meeting North Fork chief executive John Adam Kanas called and raised his bank's bid to 1.84 share, from 1.8352.
The Long Island directors then called Astoria to see if that thrift would follow suit, but Astoria declined to up the ante. Astoria, however, had earlier agreed to increase the number of Long Island directors on a combined company's board to five from four, and the Long Island board agreed to sell to Astoria.
The $1.8 billion acquisition was announced April 3.
Salomon Smith Barney will collect a $16 million fee for advising Long Island Bancorp, and Lehman Brothers will pocket $6 million for advising Astoria.
