CapStar in Tenn. presses Fed to reject investor's change in control notice

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CapStar Financial has urged the Federal Reserve to oppose an investor’s effort to buy more of the Nashville, Tenn., company’s stock.

The $1.4 billion-asset CapStar is objecting to a notice filed with the Fed by Gaylon Lawrence to build a 15% stake in the company. CapStar also wants the Fed to direct the investor to immediately divest the 10.2% stake he already has.

CapStar’s lawyers claim in a Nov. 20 letter to the Fed that Lawrence violated the Change in Bank Control Act by, among other things, building his current stake without prior Fed approval.

“Bending the rules for Mr. Lawrence and The Lawrence Group by granting in effect a retroactive approval would send exactly the wrong message to the public and the investment community,” Richard Kim, a lawyer at Wachtell, Lipton, Rosen & Katz, wrote in the letter.

The move is the latest effort by CapStar to rid itself of Lawrence, who it claims on two occasions tried to take over the banking company.

CapStar filed a lawsuit last month against Lawrence and his firm that claims the investor is pursuing an illegal takeover. CapStar also asked the U.S. District Court for the Middle District of Tennessee to force Lawrence to sell his CapStar stock.

The lawsuit claims Lawrence misled other investors when he stated in filings with the Securities and Exchange Commission that he bought shares for “investment purposes.” The investor spent nearly $21 million from June 12 to Oct. 16 on CapStar stock, according to his SEC filings. It also alleges that Lawrence should have registered as a bank holding company before building his current position.

The lawsuit contends Lawrence aims to take control, claiming he made an unsolicited bid to buy the bank before its August 2016 initial public offering in an offer presented on Lawrence Group letterhead. After the offer was rebuffed, Lawrence used his company’s letterhead to try to buy a 30% stake in CapStar from two of its biggest investors, the lawsuit claims.

“Lawrence has committed multiple violations … by filing disclosures that misstate his intentions for CapStar and obscure the role of The Lawrence Group,” the lawsuit claims.

Lawrence, for his part, stated in regulatory filings that he uses his own funds to buy CapStar stock.

Jason West, who said he works directly for Lawrence, denied claims the investor broke the law laws or filed misleading regulatory statements. He said Lawrence had expressed an interest in buying a “significant number of shares” before CapStar’s IPO, then approached institutional investors about buying their stock.

“We were surprised by the lawsuit,” West said in an interview earlier this month. “We haven’t had any conversations with management or the board. … We welcome a chance to open up a dialogue. I don’t know why [CapStar CEO Claire Tucker] feels threatened by us.”

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