Public shareholders of Sumitomo Bank of California voiced their displeasure this week about its pending sale to Zions Bancorp.
Though the cash transaction was approved by an 89% vote, 85% of the shares are held by Sumitomo Bank Ltd. in Japan. Of the publicly owned shares, roughly 62% were voted against the merger.
That reflected dismay at the unusually low price that the San Francisco bank agreed to in March, said shareholder Clinton Krislov.
"This is a deal that the public shareholders are quite clearly against," said Mr. Krislov, who owns about 500 Sumitomo shares. "This deal is absolutely inferior to virtually every other comparable bank deal in the market."
Salt Lake City-based Zions is to pay 1.3 times book value and 14 times 1997 earnings. Other recent bank deals have been running around 2.7 times book value and more than 20 times earnings.
Sumitomo shares had been trading near $50 before the deal was announced, but Zions is paying only $32.26 per share to the Japanese parent. The public shareholders are receiving $38.25 per share.
Mr. Krislov's Chicago law firm, Krislov & Associates Ltd., sued in March to block the sale. The suit, filed in San Francisco Superior Court, claims the bank breached its fiduciary duty by agreeing to sell for an unusually low price. Mr. Krislov is seeking class-action status.
He suggested that he might take further legal action because of the results of Tuesday's shareholders meeting, but declined to provide details. Citing the pending litigation, a spokesman for Sumitomo declined to comment.
Observers agreed that the price was extremely low but added there is not much recourse for unhappy shareholders.
"It just represents the risk in investing in a company that is majority- owned by a foreign institution," said Jeffrey T. Runnfeldt, an analyst with Van Kasper & Co., San Francisco. "You have a large controlling shareholder whose interests will dictate the company's future."
At Tuesday's meeting Mr. Krislov said Sumitomo's investments in year- 2000 preparations and new computer equipment contributed heavily to the low sales price. Net income in 1997 declined 8%, in part because of "technology and infrastructure," according to Sumitomo's annual report.
The lawyer argued that the low earnings drove down Sumitomo's price because it influenced the fairness opinion rendered by NationsBanc Montgomery Securities, Sumitomo's financial adviser in the deal.
"Shareholders were harmed by capital investments that will have absolutely no benefit to them," he said.