An investor has succeeded in halting Abigail Adams National Bancorp's planned acquisition of a Virginia bank.
The bank had until the end of 1997 to close its deal to buy $72 million- asset Ballston Bancorp but could not secure enough votes to win shareholder approval.
The campaign against the deal was led by Marshall T. Reynolds, a member of Adams' board of directors. Mr. Reynolds told Adams in October that he intended to vote against the deal. Adams sued Mr. Reynolds Dec. 12, claiming he was unlawfully lobbying other shareholders against the merger.
James H. Schropp, attorney for $128 million-asset Adams, confirmed that the deal is off and said the bank plans to proceed with the lawsuit.
"The bank regrets that the Ballston transaction was defeated," Mr. Schropp said, "but it intends to continue with the suit, claiming this vote was the result of an illegal proxy solicitation."
The bank is seeking monetary damages from the Huntington, W.Va., businessman to compensate for the loss of Ballston.
Washington, D.C.-based Adams announced in June it would buy Ballston for $14 million in cash and stock. At that time Mr. Reynolds, who leads an investors group that controls about 32% of Adams stock, voted in favor of the deal.
Adams' lawsuit against Mr. Reynolds claims he committed "blatant violations of the federal securities laws pertaining to disclosure and proxy statements." The suit, filed in U.S. District Court in Washington, charges that Mr. Reynolds "conducted an undisclosed shareholder solicitation ... urging shareholders to defeat the proposed acquisition."
Mr. Reynolds was away from his office and could not be reached for this story. However, in an affidavit filed in response to the suit, he stated he changed his mind because he had "come to believe that the economic terms proposed are not as good as management and the advisers they hired told us at the time."
While claiming he did not lobby shareholders to vote against the deal, Mr. Reynolds said, "I have told anyone who asked the truth as I see it."
Mr. Schropp said no date has been set for the trial.
A spokesman for Arlington, Va.-based Ballston said the bank must now consider its options.
"We are disappointed that the ideal affiliation of such like-minded banks won't take place," said Brian D. Alprin, an attorney for Ballston. "However, Ballston has a range of additional strategic alternatives. These will all be explored in due course."