Community Bank System Inc. has asked a New York State judge to dismiss a plaintiff in a shareholder lawsuit and reject a request for a preliminary injunction to block the bank's acquisition of 15 Chase Manhattan Corp. branches.
In briefs filed last week with the New York State Supreme Court in Albany, attorneys for the bank urged the court not to issue an injunction because it would "irreparably harm the company."
The company claims that an injunction would prevent officials from filing documents with the Securities and Exchange Commission to explain the transaction, while allowing institutional investors to vent their opposition in public statements.
Also, the lawyers asked the court to dismiss the complaint of one shareholder, Mary Elizabeth White, claiming she lacks standing to sue because she bought her 26,000 shares in early 1995, after the deal was announced.
Attorneys for the DeWitt, N.Y.-based company argue that the lawsuit is based only on the self-serving concerns of a group of institutional investors, led by Warren R. Marcus, president of WRM Equity Management Inc.
The $916 million-asset company accuses the investors of seeking "to scuttle the acquisition for their own ulterior motives," namely, to put the bank up for sale instead, according to an affidavit from president and chief executive Sanford A. Belden.
Mr. Marcus called the accusations against him and other investors "total nonsense."
Community Bank said in December 1994 that it would buy the 15 branches and $455 million in deposits for an 8.25% deposit premium, amounting to about $37.5 million. The bank planned to raise at least $30 million from a stock offering to finance the deal.
But the deal met with strenuous opposition from institutional investors. And last week, the three shareholders filed suit, claiming that the deal would drain the bank's capital and hurt book value and earnings per share.
Mr. Belden rejected the plaintiff's accusations that bank directors failed to consider the ramifications of the deal.
In fact, he said, senior management kept the board well informed of the potential risks and benefits of the transaction, including the reduction of the bank's Tier 1 capital ratio below the 5% mark.
Directors considered investors' objections and responded to some concerns by altering the bank's financing plans, but still felt the deal "presented a unique opportunity," Mr. Belden said.