Republic New York Corp.'s hostile takeover bid for Green Point Savings Bank is an unusual challenge to the managers of a mutual financial institution - in the form of a public appeal to its depositors.

To make its offer. Republic is counting on the thrift's depositors to wield one of their few rights: a chance to vote on the institution's conversion from mutual to stock form of ownership.

But to succeed, Republic must convince them its offer is better than their other major right - the right to windfall profits have typically accrued to the charter owners of thrifts whose shares have debuted in the market in recent years.

Green Point, based in the New York borough of Queens, is in the midst of a standard conversion with an initial public offering of stock scheduled next month in its proposed holding company, GP Financial Corp.

Republic is bidding to buy Green Point in a merger-conversion transaction. It finally disclosed its effort to the public last weekend after being turned down repeatedly by the thrift's management.

Most observers think the cards are heavily stacked against Republic.

"It's very unlikely they will prevail," said Michael L. Ryan, a lawyer specializing in banking matters at the New York firm of Cleary. Gottlieb, Steen & Hamilton.

Widespread Pattern

Mr. Ryan said many thrifts in the past decade have gotten such bids while they were pondering conversion to stockholder ownership. They have generally been deemed far too advantageous to the prospective buyer.

Meanwhile, most thrifts that have undergone standard conversions have seen their stock price "bump up considerably after reaching the market," said Mr. Ryan.

Most impressively, shareholders of Cragin Financial Corp., Chicago, reaped benefits twice - when heir stock went public and when the company was sold to ABN Amro Bank this year.

Counter-Proxy Tactic

"We remain firmly committed to the plan of conversion," said Thomas S. Johnson, chairman of Green Point and former president-of Manufacturers Hanover Corp. and Chemical Banking Corp. He asserted that a merger-conversion would let Republic "reap windfall profits for their owners and directors."

Republic's best chance appears to be in establishing the right to make a counter-proxy solicitation of Green Point's depositors in advance of the Dec. 10 meeting at which they are to vote on the charter conversion and stock offering.

Republic has offered a $100 million "special interest payment" to Green Point depositors - about 2% additional interest for a typical account. Green Point's management has characterized this as a bribe.

The right of third parties to solicit mutual depositors by proxy is not established in New York State law. To proceed, Republic may assert this is integral to the depositors' voting rights on conversion.

In addition, Republic would have to persuade depositors that Green Point management would get an unfairly big piece of the pie in the public offering.

The depositors are, in theory anyway. the owners of mutual institutions. Over the years, however, courts have declined to find rights in this form of ownership comparable to those of investors in a stockholder-owned company.

"The right to vote on a conversion is a mutual savings bank depositor's only involvement in the management and affairs of the institution," the state regulator said in a clarifying letter to Republic's management.

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