A large shareholder of First California Financial Group (FCAL) has warned that it may acquire more stock and seek to remove directors and management to force a sale of the Westlake Village, Calif., company.
Gideon King, president of Loeb Capital Management, wrote in a letter to First California's board on Thursday that his company had become frustrated with communication from the $2 billion-asset bank regarding PacWest Bancorp's (PACW) offer to buy it or First California's plans to increase shareholder value.
Loeb Capital owns about 7% of First California's outstanding stock.
PacWest, based in Los Angeles, had offered in May to acquire First California for $7.25 per share, or $212 million. The bid was unsolicited, though some of First California's largest investors, including the Pohlad family and Castine Capital Management, were unhappy with the bank's plan to grow and had pushed for it to seek a buyer. First California said in January that it had hired an investment bank to explore its options but then announced about a month later plans to buy the $141 million-asset Premier Service Bank.
After PacWest made its offer public, another investor, Basswood Capital Management, wrote a letter to First California's board stating that it would not hesitate to take steps to remove the current board if the bid was not reconsidered.
King wrote that shareholders had been treated to "double-talk" with respect to PacWest's "credible cash offer," which could have been used as a springboard to sell the company to the highest bidder. Investors "have been subjected to vague press releases that give shareholders no assurance that the board takes its fiduciary duties seriously," he wrote.
Officials at First California did not return a call seeking comment Friday. PacWest failed to provide satisfactory answers after it requested further information on the terms of the "highly conditional offer," First California argued in a press release in May. It balked at granting PacWest exclusive negotiating rights, saying it was not in the best interest of shareholders "in the absence of satisfactory clarification of the terms and value of its proposal."
King had given First California's management "the benefit of the doubt" until Thursday's press release discussing its second-quarter earnings, he wrote.
In the earnings release, C. G. Kum, president and chief executive of First California, said: "As always, we remain steadfast in enhancing the value of the First California franchise for our customer, employee and shareholder base."
King wrote that "Kum's pointed language seems to say it best: shareholders come last." The earnings release also failed to provide details about how the company would maximize value going forward, he wrote.
The board and management should do "what is right and shed inclinations to entrench themselves," King wrote. He urged them to sell the company to the highest bidder and threatened to acquire more stock in First California. Additional shares would give him the power to take tougher steps, such as removing directors and members of management to "make certain that a process of value maximization is executed professionally and without conflicts of interest."
First California reported on Thursday that it earned $2.9 million in the second quarter, up 38% from a year earlier. Earnings per share of 10 cents met expectations of analysts polled by Thomson Reuters.
First California's stock closed at $6.62 per share on Friday, up 1.22% from a day earlier. Since the announcement of PacWest's attempt to buy the company, First California's stock has surged, allowing it to issue substantially fewer shares to buy Premier Service Bank.