Confusion among stockholders has forced Suffolk Bancorp to withdraw a proxy proposal to permit the quintupling of the number of outstanding shares in order to prevent a hostile takeover.
Officials of the $812 million-asset company had asked shareholders to approve an increase in the number of authorized common shares to 37.5 million from the current 7.5 million.
If approved, the additional shares could be issued at any time without special stockholder approval, enabling the board to suddenly dilute the Riverhead-based bank's ownership and deter a hostile takeover.
Suffolk directors decided to drop the plan after shareholders mistakenly thought that the company's book value, and thus the value of their investment, was being reduced, said corporate secretary Douglas Ian Shaw. In fact, book value is unchanged, he said.
Shareholders were also confused about a shareholder rights plan that directors plan to adopt, he said. It would allow shareholders to purchase more stock at a discount if any company tries to buy up stock without board approval.
"What we had were some very confused shareholders and we felt that the best thing to do would be to withdraw the proposal," Mr. Shaw said.
Officials haven't decided whether to resubmit the stock increase proposal, which requires approval by 70% of eligible shares.
Currently, Suffolk has 3.8 million shares outstanding.
Suffolk's efforts to protect itself from hostile takeovers comes as the bank is embroiled in a battle with Long Island rival North Fork Bancorp. The $2.7 billion-asset Mattituck company already owns 4.9% of Suffolk's stock and has applied for Federal Reserve approval to purchase up to 19.9%.
Although North Fork officials have claimed their purchases are benevolent investments, Suffolk officials cried foul and protested to the Fed against its larger neighbor, claiming that a merger between the two would give North Fork a monopoly over Eastern Long Island's small business market.
Suffolk officials had planned to develop a shareholder rights plan months before North Fork started buying shares, but "one has to admit that . . . it certainly increased our reasons for doing it," said Edward J. Merz, president and chief executive of Suffolk.