CapStar agrees to end long-running litigation against investor

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CapStar Financial said it had settled with a large investor to resolve a 2017 court case over his alleged bid to buy the Nashville, Tenn., company.

The $2 billion-asset CapStar had sued Gaylon Lawrence and Lawrence Group, a firm he owns, in the U.S. District Court for the Middle District of Tennessee, claiming that he was pursuing an illegal takeover.

The lawsuit claimed that Lawrence had made a “series of false” statements in regulatory filings at the time, and had failed to register as a bank holding company before building a position in CapStar exceeding 10%. The company sought to force Lawrence to sell those shares.

Under the terms of the settlement, CapStar's management and board agreed to regularly scheduled meetings with Lawrence, and he agreed to cap his investment at 9.9% of CapStar’s outstanding common stock for 21 months. Lawrence also agreed that, on major actions requiring a shareholder vote, he would vote consistent with the board’s recommendations.

“We look forward to engaging with Gaylon and building a productive and mutually beneficial relationship,” said Timothy Schools, CapStar president and CEO. “CapStar’s board appreciates Gaylon’s substantial investment and support as we work to maximize our potential.”

Lawrence said he is "supportive of CapStar’s strategic direction, board and leadership team.”

“We appreciate our constructive dialogue with CapStar and the progress we have made together,” Lawrence said. “We initiated an investment in CapStar due to the attractiveness of Nashville’s $64 billion deposit market and the bank’s outstanding prospects."

In the 2017 lawsuit, CapStar claimed that Lawrence misled other investors when he stated in Securities and Exchange Commission filings that he was buying shares for “investment purposes.” The investor spent nearly $21 million from June 12 to Oct. 16, 2017, on CapStar stock, according to his SEC filings at the time.

The lawsuit contended that Lawrence aimed to launch an unsolicited bid to buy the banking company before its August 2016 initial public offering.

Lawrence disputed the allegations and has remained a prominent investor.

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Litigation Tennessee Court cases Banks, thrifts and holding companies Corporate governance Community banking M&A