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Banking industry

Sovereign Bancorp Revises Deal with Santander to Avoid Shareholder Vote

Strategic Insights

— 1 min read

Sovereign Bancorp, a leading bank holding company, has revised its deal with Banco Santander Central Hispano S.A. following opposition from dissident shareholders. The revised deal, which eliminates the board entrenchment provision, no longer requires shareholder approval under the New York Stock Exchange (NYSE) rules. This change comes after dissident shareholders, including Relational Investors L.L.C. and state workers' pension funds, had urged the NYSE to block the original deal or force Sovereign to put it to a vote.

Key Takeaways:

  • Sovereign Bancorp has revised its deal with Banco Santander Central Hispano S.A. to eliminate the controversial board entrenchment provision.
  • The revised deal no longer requires shareholder approval under the New York Stock Exchange (NYSE) rules.
  • The change eliminates the veto power that the original deal would have given to Santander to block any attempt to replace Sovereign's chairman, Jay S. Sidhu.
  • Santander is no longer obligated to vote all of its Sovereign shares in favor of Sidhu and his fellow directors.
  • The revision also makes it easier for Sovereign to accept a competing bid if it gets a better offer by July.
  • Sovereign wants to use Santander's investment in its planned $3.6 billion purchase of New York's Independence Community Bank Corp.
  • Dissident shareholders, including Relational Investors L.L.C. and state workers' pension funds, may still complain to the Securities and Exchange Commission.
  • Relational intends to run its candidates against two Sovereign directors in next year's board elections.

Statistics:

  • 20%: The percentage of Sovereign shares that Santander would have acquired under the original deal.
  • $2.4 billion: The value of the Santander investment in Sovereign.
  • 10 years: The previous guarantee that Santander had to keep Sovereign's current board in power.
  • $3.6 billion: The value of Sovereign's planned purchase of New York's Independence Community Bank Corp.
  • July: The deadline by which Sovereign can accept a competing bid.
  • 2005: The year in which this deal was revised.

Sources:

  • The Philadelphia Inquirer, November 23
  • Sovereign Bancorp Inc.
  • Banco Santander Central Hispano S.A.
  • NYSE rules
  • Securities and Exchange Commission (SEC)

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