Valley Community Bank's biggest shareholder has gone public with his objection to the Pleasanton, Calif., bank's sale to FNB Bancorp in San Francisco.

Stephen Taylor, chairman of Taylor Asset Management in Chicago, called the deal "grossly unfair" to the $139 million-asset Valley's investors. Taylor took aim in a press release Friday at the deal's valuation — roughly half of the seller's book value — and $500,000 in payments to officers and insiders.

"This board may have put their own interests ahead of shareholders," Taylor said. "We must vote down this deal and replace the board if necessary… and if we choose to sell, we should conduct an appropriate process focused on maximizing shareholder value."

Taylor said in an interview that he hopes to rally shareholders to object to the deal at an Oct. 23 fairness hearing called by the California Commissioner of Business Oversight. "Should it come to a shareholder vote, I believe it may be difficult for Valley Community to secure the 2/3 vote of outstanding shares to approve" the sale, he added.

Taylor also said an outside party he had hired to analyze the deal determined that "the value should be much higher." Taylor declined to identify the firm, but a source familiar with the matter said it was Tier One Partners.

FNB, the holding company for the $901 million-asset First National Bank of Northern California, agreed to buy Valley Community in May for $6.2 million. FNB also plans to redeem the 5,775 shares of preferred stock Valley issued to the Treasury Department as part of the Troubled Asset Relief Program for $4.3 million. The preferred stock was sold in an auction last fall.

FNB disclosed in Sept. 30 regulatory filing that it insisted, as part of the deal, that Valley Community cancel the change-in-control benefits and terminate the employment of three executives, including President and Chief Executive Richard Loupe. Valley Community also entered into non-solicitation and confidentiality agreements with the executives. In exchange, Valley Community agreed to pay them a total of $500,800 after the deal's completion, including $210,000 to Loupe.

Valley Community disclosed last month that an unnamed investor with a 9.8% stake had requested a list of its other registered shareholders. Loupe wrote in a Sept. 2 letter to shareholders that Valley Community had provided the shareholder with the list.

"This shareholder has also expressed to our board … his opposition to the merger," Loupe wrote, adding that the bank's directors had met to consider the objections. At that meeting, directors "found that the proposed merger … remains in the best interest of Valley Community Bank and its shareholders."

Calls to Loupe and Taylor were not immediately returned.

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