The proxy battle between People's Bancshares in New Bedford, Mass., and an investor group is becoming more contentious.
The $1 billion-asset parent of People's Savings Bank is trying to fend off the Kingston Group of New York, which owns 9.2% of the thrift company's stock and is pushing it to explore strategic alternatives including a sale.
People's tried to placate the group in April by offering it a seat on the 10-member board.
"We countered by saying we would accept two board seats, no standstill agreement, and require the bank to retain an investment banking firm and compensate us for the proxy fight," said Thomas F. Gillen, managing director and general partner of RCG Kingston LLC. The counteroffer was promptly rejected by People's president and chief executive officer Richard Straczynski, who also rejected the group's criticism of his company.
In a May 1 letter to shareholders, Mr. Straczynski said net income at People's has risen fivefold since 1994 and earnings per share have more than tripled. He also cited an independent review by SNL Securities that ranked the company third among the country's 100 largest publicly owned thrifts in return on equity during 1998 - 23.9% - and 13th in performance overall.
Mr. Straczynski told shareholders that the Kingston Group has a selfish agenda and that it is "desperate" to compensate for its own lackluster 1999 performance. In a May 26 filing with the Securities and Exchange Commission, People's stated: "With performances like this, the Kingston Group's hedge funds are likely facing pressure from their own investors."
Mr. Gillen said his funds' performance is "irrelevant."
Kingston's "motivation is very clear," Mr. Gillen said: to boost the thrift's stock, which he said has historically underperformed by comparison with peers. It has traded at around $17 a share the past few weeks, down from a high of $23 in April 1999. Mr. Gillen said he believes it trades low because investors find the company's leveraging practices "risky."
"The market discounts their strategy of using securities to enhance their earnings," he said, adding that the People's securities portfolio at the end of March had an unrealized loss of $48 million.
Kingston says it is confident that it will win two board seats at the thrift's annual shareholder meeting June 16.
"Once that happens, our nominees will thoroughly review the business plan of the company, which current management refuses to do," Mr. Gillen said.