BOSTON - NCUA has agreed to review its merger guidelines to see if they adequately address so-called hostile takeover attempts, such as Wings Financial FCU's bid to acquire Continental FCU.
NCUA Chairman JoAnn Johnson said here last week the agency will review its comprehensive merger guidelines to determine whether they match up with rules governing non-friendly mergers at other bank and thrift and public corporation regulations, like those of the SEC. "If NCUA rules are found to be inadequate or insufficient to provide member protection, transparency and fairness, the board will decisively move to address them," said Johnson during remarks to the Massachusetts league's Governmental Affairs Day Conference.
Johnson's remarks came as Wings Financial, the $1.6-billion credit union serving air transportation workers all across the country, continued to solicit members of the much smaller Continental FCU, despite a rebuff by the board of the $180-million CFCU. Wings continued last week passing out fliers and stating on a website it will give each Continental member $200, as well as provide better rates, if they can persuade the Continental board to change its position and agree to a merger.
In corporate parlance, any effort to solicit member/shareholders to accept a merger after the board has voted no is a hostile effort. The Wings overture is one of the first hostile merger attempts among credit unions, which until now have relied on "friendly" merger agreements, thus upsetting many in the organized credit union movement.
But Johnson insisted last week that a hostile takeover is barred under NCUA's comprehensive merger rules, which require the consent of both boards in any credit union combination. "Part 708b of NCUA's regulations sets forth very specific rules governing credit union mergers and was designed to ensure the full consent and cooperation of both institutions when such a transaction would occur," said the chief credit union regulator. "This means that both boards must approve any merger proposal before NCUA will consider it."
Johnson's concerns were echoed last week by John Tippets, president of American Airlines FCU, one of just four credit unions with a nationwide TIP (tradewide, industrywide and professionwide) charter to serve the nation's air transportation workers. The four CUs were involved in discussions last year on a potential combination under one roof, but the proposal was never consummated. Tippets said last week any discussion of his $4-billion credit union appearing as a "white knight" to save Continental from the throes of Wings Financial is premature.
Formal Standards Called For
Tippets, one of the recognized leaders in the credit union movement, said that formal standards for non-friendly merger proposals, such as the ongoing battle for Continental FCU, need to be set. "There ought to be guidelines for this sort of thing. Either NCUA or Congress out to do it," said Tippets. He said that certain facets, in particular need to be addressed, such as the proprietary or allowable scope of financial inducements to members, as well as a record date for membership, to determine which members are eligible for the payment, as is set out for publicly owned corporations.
Meantime, NCUA's role is not a passive one, even though it has yet to receive a formal merger agreement, said Johnson. "NCUA is committed to make certain that all statutory and regulatory requirements are satisfied. This includes an Agency assessment of the accuracy of all advertising and representations being made about the merger," said the NCUA chief.(c) 2007
