A big investor in Banc of California wants the Irvine company to consider selling itself.
Legion Partners Asset Management in Beverly Hills, Calif., said in a regulatory filing Tuesday that it wants the $11.2 billion-asset company’s board to immediately hire an independent financial adviser and form a special committee “to consider all strategic alternatives … including a possible sale.”
Legion, which owns about 6.3% of Banc of California’s common stock, said its filing was in response to the company’s disclosure Monday that it provided inaccurate information in an October press release. Banc of California also faces an investigation by the Securities and Exchange Commission associated with last fall’s release.
Banc of California also announced on Monday that Steven Sugarman had resigned as chairman and CEO and that it had permanently split those roles. A banking veteran was appointed chairman, and the board said it plans to form a search committee to find a new CEO.
The disclosures raise “serious concerns” about Banc of California’s corporate governance, Legion said in its filing. Despite the corporate governance moves, Legion said it had “lost confidence” in the board, adding that it wants the company to bring in new independent directors.
Many of Banc of California’s issues stem from claims made by an anonymous blogger in October that Sugarman had ties to Jason Galanas, a Los Angeles financier who was charged last year with defrauding investors. The company has also been hit with claims of questionable related-party transactions.
Banc of California said in an Oct. 18 release that it had launched an independent investigation and found the blogger’s claims to be groundless. But the release had “inaccurate” information, notably that management — and not the board — had authorized the investigation. The release also characterized the probe as independent when the initial law firm involved had previously represented Sugarman and the company.
The company said on Monday that a separate investigation launched by its board — and handled by a different law firm — had so far found no evidence that Galanas had “any direct or indirect control or undue influence over the company.” That investigation also found no indication that "any loan, related-party transaction or any other circumstance has impaired the independence of any director."
Legion has also taken issue with Banc of California’s unwillingness to discuss its concerns. The firm said it has “tried to engage with management and the board regarding … but the issuer has failed to respond.”
PL Capital, an activist investor that owned 6.9% of Banc of California’s stock last month, complained last year that the board had refused to meet with its managing principals to discuss concerns that included a naming rights deal for a soccer stadium with ties to a team that counts Sugarman’s brother among its investors.
PL Capital has declined to comment on Banc of California’s recent disclosures.