Sunrise Bancorp is fighting a lawsuit brought against it by an investor who accuses directors of neglecting shareholders' interest.
Shareholder Leslie Susser is charging that directors refused to consider an $85 million merger offer from competitor North Fork Bancorp, thereby breaching their fiduciary duty..
The lawsuit, filed in late April in Delaware Court of Chancery, alleges that directors of Farmingdale, N.Y.-based Sunrise have engaged in "concerted and continual action to entrench themselves in their lucrative positions" through provisions of company bylaws designed to prevent acquisitions.
Mr. Susser wants the court to force Sunrise officials to cooperate with potential buyers and consider any merger offers. He also wants officials to evaluate and enhance the company's value as a merger candidate, expose the company to the marketplace "to create a fair and active auction for Sunrise," and eliminate any conflicts between directors' own interests and their fiduciary duty.
The suit also calls for an injunction to bar officials from implementing any bylaws that would restrict a potential buyer.
Mr. Susser is requesting class-action status on behalf of hundreds of Sunrise stockholders, holding 3.3 million outstanding shares.
Officials of the $594 million-asset thrift dismissed the complaints.
"The company is in the process of reviewing the allegations with counsel and strongly believes the suit is without merit," said president and chief executive Joseph A. Melillo.
In a January letter to Sunrise, North Fork president and chief executive John Adam Kanas offered to buy the company for a cash price equal to 136% of Sunrise's book value. That's equal to about $26 per share, based on a Dec. 31 book value of $19.34, according to court documents.
Mr. Kanas also said he would raise the offer if Mattituck, N.Y.-based North Fork determined that Sunrise was worth more.
The merger offer is still on the table, but Sunrise has repeatedly rejected it without meeting with Mr. Kanas, according to the lawsuit.
North Fork has also bought at least 5.7% of Sunrise stock as of April 10, with approval from the Federal Reserve Board to buy up to 9.9%.
The lawsuit also claims that parts of the company's bylaws, inserted when Sunrise converted to stock form in April 1993, "make an acquisition of the company and the bank very difficult and expensive."
According to the court documents, an owner of more than 10% of the company's stock cannot vote more than 10% of the shares. Approval of at least 80% of the outstanding shares is required to amend that provision, as well as to approve any merger or purchase of Sunrise.
But the company's executive officers, directors, and the employee stock ownership plan already control 22% of the stock.
And the board of directors has imposed a staggered board and barred cumulative voting, making it difficult to mount a proxy challenge for company control, according to the lawsuit.