MetroCorp (MCBI) in Houston hired a consultant to scout possible Chinese suitors before agreeing to sell to East West Bancorp (EWBC) in Los Angeles.
The disclosure was part of a proposed settlement among East West, MetroCorp and disgruntled MetroCorp shareholders. As part of a memorandum of understanding reached on Dec. 10, the $24.5 billion-asset East West also agreed to lower the deal's termination fee to 2.5% of the merger consideration, from 3%. Based on the $273 million value of the deal reached in September, the reduction is roughly equal to $1.4 million.
MetroCorp shareholders filed a class-action lawsuit in the U.S. District Court for the Southern District of Texas. East West and MetroCorp disclosed the negotiations in separate regulatory filings.
The companies also disclosed that East West originally submitted a letter of intent offering $281 million for MetroCorp, but reduced the offer by 3% to the current amount. However, East West also agreed to pay for roughly $2.5 million in employee stock options and a severance package for George Lee, MetroCorp's chairman, president and CEO, valued at nearly $1.8 million.
Court approval is required for the proposed settlement, and the companies noted that there is no guarantee that the memorandum will lead to a formal resolution. The proposed settlement will not delay MetroCorp's shareholder meeting, set for Monday, though East West said the terms "may affect the amount of merger consideration" depending on how the payout is calculated.
"East West, MetroCorp, and the directors of MetroCorp continue to believe that the action is without merit and vigorously deny the allegations that MetroCorp's directors breached their fiduciary duties," the companies said.
MetroCorp also disclosed in its filing that the State of California Department of Business Oversight had approved the merger and that the Federal Reserve Board "has indicated that it does not object" to the transaction.