ESOP Could Hold Sway In Ex-CU ProxyFight

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CRANFORD, N.J. - (02/07/06) -- An employee stock ownership plancreated ostensibly to reward employees could serve as a backstop tocurb outside shareholders during an escalating proxy battle atformer credit union Synergy Financial (Bank). The ESOP holds 7% ofthe ex-credit union¡¦s stock which management hopes tocombine with the 9.5% they control to get their incumbent directorsreelected to the board. A Wall Street group called PL Capital,which owns 9.9% of the stock in the converted credit union hopes toturn out two of the incumbents and win those seats for itself. PLCapital, which acquired the largest stake in the bank over the pasttwo months, has roughly the voting power of the insiders, 9.9%, butis at a disadvantage because the insiders control the vote of theESOP, according to one industry consultant familiar with such proxycontests. That means the Wall Street group is going to need thesupport of other big institutional stockholders in the creditunion-convert, including Mendon Capital Advisors, which holds justunder 5%; First Manhattan Co., which owns almost 3%, and mutualfund giants Vanguard, Wellington Management, and Gabelli.Institutional investors own almost 20% of Synergy Financial, whichwas known until 1999 as Synergy FCU. PL Capital, which has beeninvolved in at least 10 other proxy contests for small banks, saidit wants Synergy Financial to pay out some of its $95 million incapital in the form of stock

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