Sovereign Bancorp Wins NYSE Approval for Revised Stake Sale to Santander

Strategic Insights -

Sovereign Bancorp Inc., a Philadelphia-based bank, has secured approval from the New York Stock Exchange (NYSE) to proceed with its planned $2.4 billion stake sale to Santander Central Hispano SA without a shareholder vote, after revising the deal's terms. The revised terms eliminate a provision that would allow Santander to veto the termination of Sovereign's chief executive officer, and eliminate a 10-year job guarantee for Sovereign's board members. The NYSE confirmed the revised terms, but the deal has not silenced opposition from institutional shareholders, including Relational Investors LLC, the California Public Employees' Retirement System, and the California State Teachers' Retirement System.

Key Takeaways:

  • The revised stake sale agreement eliminates a provision that would have allowed Santander to veto the termination of Sovereign's CEO.
  • The revised terms also eliminate a 10-year job guarantee for Sovereign's board members.
  • The NYSE approved the revised stake sale agreement without a shareholder vote.
  • Institutional shareholders, including Relational Investors LLC, the California Public Employees' Retirement System, and the California State Teachers' Retirement System, opposed the original deal, citing concerns that it would entrench Sovereign's management and thwart a higher bid.
  • The Council of Institutional Investors, a Washington-based association of mutual funds with more than $3 trillion in assets combined, also criticized the deal.
  • The revised terms reflect changes made to address concerns from institutional shareholders, but may not quiet the debate about the transaction.
  • The deal involves a stake sale of $2.4 billion and a subsequent purchase of Independence Community Bank Corp.
  • Sovereign Bancorp has $62.9 billion in assets and operates about 650 branches in the northeastern U.S.

Statistics:

  • $2.4 billion: The planned stake sale from Sovereign Bancorp to Santander Central Hispano SA.
  • 10 years: The job guarantee originally offered to Sovereign's board members, which was eliminated in the revised terms.
  • 650: The number of branches operated by Sovereign Bancorp in the northeastern U.S.
  • $62.9 billion: The total assets of Sovereign Bancorp.
  • 12.9 percent: The collective stake of the five institutional shareholders, including Relational Investors LLC, who opposed the original deal.
  • $3 trillion: The combined assets of mutual funds represented by the Council of Institutional Investors.
  • 120: The number of branches operated by Sovereign Bancorp in New Jersey.
  • 40: The number of branches operated by Independence Community Bank Corp. in New Jersey.

Sources:

  • Bloomberg News
  • NYSE press release (no date provided)
  • Sovereign Bancorp statement (no date provided)
  • Relational Investors LLC press release (no date provided)
  • California Public Employees' Retirement System press release (no date provided)
  • California State Teachers' Retirement System press release (no date provided)
  • Franklin Mutual Advisors LLC press release (no date provided)
  • New Jersey Division of Investment press release (no date provided)
  • The Council of Institutional Investors press release (no date provided)