A small Massachusetts thrift’s shareholders have approved a merger proposal that sparked three counteroffers, court action, and criticism over the price.
But another hurdle remains. Two shareholders of the $300 million-asset Westborough Bank have filed a lawsuit arguing that the price of $20.6 million in cash is too low. They are seeking an injunction to block the deal with Assabet Valley Bancorp in Hudson until the case is resolved. A hearing on that request is scheduled for Aug. 9. Related Links Shareholders Sue Over Sale Price in Massachusetts Deal Rejected Thrift Suitor Ups His Bid, Threatens a Suit A Mass. Thrift Deal Spawns 2 Rival Bids Westborough's Press Release on Sharholder VoteJoe MacDonough, Westborough’s president and chief executive officer, said he is “extremely pleased” with the shareholder vote at the annual meeting last week. About 56% of the voting publicly held shares were cast in favor of the deal with Assabet.
Barring an injunction, Mr. MacDonough said, Westborough plans to proceed with closing the deal.
Still, several people at the meeting questioned why Westborough’s directors stuck by the offer of $35 a share, even after receiving higher offers from other biders — $38.50, $40, and $41. The directors said the competing proposals, all from individuals who own Westborough stock, were not “superior” to Assabet’s, because of the legal and regulatory challenges that might have resulted.
Roughly 36% of Westborough’s stock is publicly held. The rest is owned by its mutual holding company, Westborough Bancorp.
Taking into account all of the shares, 78.5% were voted in favor of the Assabet deal, and 11.3% were voted against, with the remainder abstaining.
Because the directors can vote the mutual holding company’s stock, the shareholder approval was never in doubt. But Mr. MacDonough said he is gratified that a majority of the voting public shares approved the transaction.
The suit, filed by Phillippe E. Gut and Gwen Pratt Gut last month in the Massachusetts Superior Court in Worcester, accuses Westborough’s directors — including Mr. MacDonough and John Casagrande, its chief financial officer — of breaching their fiduciary duties by agreeing to a “grossly inadequate” price and pursuing the Assabet offer over the higher-priced ones for their own personal gain.
If the merger goes through, Mr. MacDonough, Mr. Casagrande, and other directors would receive about $2.5 million from cash bonuses, consulting agreements, and other benefits. That equates to about 12% of the amount that the public shareholders would receive.
A local paper quoted one shareholder at the annual meeting who called it “a country club deal.”
Mr. MacDonough said the suit alone would not hold up the merger. “But if, in fact, the judge grants the plaintiffs an injunction, that would result in a delay of the transaction.”
Westborough’s deadline for closing the Assabet deal is Aug. 15.