KS Bancorp in Smithfield, N.C., is paying a larger competitor to give up a hostile bid.
The $374 million-asset company said in a press release Wednesday that it had settled litigation with First Citizens BancShares in Raleigh, N.C. The $34 billion-asset First Citizens had filed a lawsuit against KS Bancorp as part of an effort to take over the much smaller bank.
Under the terms of the settlement, KS Bancorp repurchased all of its shares held by First Citizens and its affiliates. In exchange, First Citizens agreed to dismiss its lawsuit.
Other terms of the settlement will remain confidential, KS Bancorp said.
KS Bancorp did not disclose how much it paid First Citizens. The amount could be nearly $4 million, based on the number of shares First Citizens held and KS Bancorp’s closing stock price on Tuesday.
“We understand First Citizens’ interest in our company,” James Parker, KS Bancorp’s chairman, said in the release.
“However, our board has resolved that it is in the long-term best interests of KS and its shareholders that KS remains independent,” Parker added. “Our management team believes that KS Bank is located in one of the most-attractive economic markets in North Carolina and is well-positioned to continue its growth and profitability.”
The quarrel between KS Bancorp and First Citizens goes back to last June, when First Citizens offered to buy KS Bancorp for $33 a share. After KS Bancorp declined, First Citizens raised its offer to $35 a share, or roughly $45.9 million, and issued a press release publicizing its efforts.
First Citizens began amassing a stake in KS Bancorp earlier this year after the Federal Reserve granted its request to buy up to 80% of the smaller bank's shares. The move prompted KS Bancorp to implement a shareholder rights plan that would have given all of its shareholders, other than First Citizens, rights to buy more stock if First Citizens amassed a 15% stake.
First Citizens challenged the rights plan's legality in North Carolina Business Court, claiming that it was discriminatory. A judge temporarily blocked the plan and raised the possibility that First Citizens could ultimately prevail in its challenge.
KS Bancorp recently considered becoming a Delaware corporation, believing that the state’s corporation laws would be more agreeable to its rights plan. Its shareholders were set to vote on the change at an annual meeting scheduled for May 29.