Shareholders of TierOne Corp. of Lincoln, Neb., have approved its deal to be sold to the real estate investment trust CapitalSource Inc., but the banking company's board still plans to renegotiate the terms if the buyer's stock continues to trade down.
CapitalSource, of Chevy Chase, Md., announced the deal in May. It agreed to pay $652 million in cash and stock, or $34.46 a share, for the $3.5 billion-asset TierOne.
CapitalSource's stock is down about 33% since the deal's announcement. TierOne's largest investor, Private Capital Management of Naples, Fla., said on Nov. 9 that because of the decline in the buyer's stock price it was voting against the deal, and on Nov. 16 an independent advisory firm, Proxy Governance Inc. of Virginia, urged shareholders to turn down the deal.
The nation's largest proxy firm, Institutional Shareholder Services in New York, weighed in last week, urging shareholders to vote in favor of the deal.
On Thursday shareholders approved the deal "by a comfortable margin" above the simple majority of 18 million shares needed, said Ed Swotek, a TierOne senior vice president.
In a news release posted on its Web site Thursday, CapitalSource said "shareholders of TierOne have recognized the substantial benefits of this merger. … TierOne's community banking franchise will bring diverse and stable funding to the combined company, while CapitalSource's national commercial lending franchise will bring diverse, profitable and high credit quality assets to TierOne — assets which are particularly important in the current market environment."
Both companies' share prices spiked Friday on news that the deal had been approved. In late afternoon trading TierOne shares were up 8.4% from Thursday's closing price, to $23.22. CapitalSource's shares were trading at $16.69, up 6.4%.
Still, CapitalSource's shares would have to continue to rise, to about $22 a share, or the company could have to renegotiate the deal.
Mr. Swotek said Friday that TierOne's board still intends to exercise its right to renegotiate, if during the 10 days leading up to regulatory approval, CapitalSource's stock is trading 15% less on average than it was when the deal was announced and 15% less than the S&P 500 Financials index.
CapitalSource would not discuss that possibility on Friday, but at an investor conference two days before the vote, its chief financial officer, Thomas Fink, said it had no intention to renegotiate the deal.
Regulators could approve the deal by yearend or next quarter. Mr. Swotek said TierOne would retain its name.
