March has been a cruel month for Republic First Bancorp in Philadelphia.
Over the past two weeks, the $5.6 billion-asset company has grappled with a nasty split on its board of directors, a burgeoning proxy fight and a lawsuit. Now, a group of activist investors is seeking to buy the company out from under its current management team, led by retail banking wizard Vernon Hill.
The activists, led by insurance executive George Norcross and veteran banker Greg Braca, say they are willing to invest up to $156 million to boost operations and acquire a majority stake in Republic First. As part of that pledge, on Monday they offered to inject $50 million via purchase of preferred stock, then purchase common shares in a second-step transaction until it holds a majority.
The Norcross-Braca group, which currently owns a 9.6% stake in Republic First, has made Hill’s resignation a condition of the deal proceeding. It intends to replace him with Braca.
In a response filed Tuesday with the Securities and Exchange Commission, Republic First’s board stated it would review the offer with its advisors. Chief Financial Officer Frank Cavallaro did not return a reporter’s call.
A Norcross-Braca spokesman declined to comment beyond the press release the group issued Monday.
The offer, which expires March 21, is the latest salvo in the Republic First management team’s increasingly bitter battles with two separate activist investor groups,
Last week, four Republic First directors, including Harry Madonna, the company’s founder and its former chairman and CEO, issued a press release accusing Hill and his allies on the board of seeking to implement employment agreements that would provide the company’s senior management team with substantial severance payments should Hill be voted off the board or cease serving as CEO.
The group, calling themselves concerned directors, alleged also that Republic First was seeking to hire a firm connected to Hill’s wife to provide architectural and interior design services.
On March 2, five days before the directors’ press release was made public, Republic First indicated it would not renew Madonna’s employment contract when it expires next year, In addition to his position as director, Madonna currently serves as Republic First’s president and chairman emeritus.
The imbroglio with Madonna and the other concerned directors prompted the Norcross-Braca group to sue Republic First, Hill and three other directors in the Philadelphia Court of Common Pleas on March 9, claiming their alleged attempts to modify management’s employment agreements serves to entrench Hill and disenfranchise Republic First shareholders.
The case is still active.
Independent from the Norcross-Braca group, Driver Management is seeking to elect three directors, including Peter Barthalow, former CFO at Dallas-based Texas Capital Bancshares. It’s seeking to prompt Republic First to examine strategic options, including a possible sale or a shift in its business model. Driver filed a report with the SEC March 8 urging shareholders to support its slate.
Hill served as an investor and consultant to Republic First for several years before he joined the company as chairman in December 2016, arriving just as Republic First completed a $100 million capital raise. Hill was
Under Hill’s leadership, Republic First, has emphasized retail branches and deposit gathering, similar to the strategy Hill used to build Cherry Hill, New Jersey-based Commerce Bancorp into a retail banking powerhouse in the 1990s and early 2000s, before its 2008 sale to TD Bank. Since 2008, Republic First’s branch count has increased from eight to 32. Deposits have grown from $860.3 million to $5.3 billion at year-end 2021, good for a 15% combined annual growth rate.
Despite those results, both the Norcross-Braca and Driver Management groups have criticized Hill, claiming his retail-oriented strategy has failed to translate into shareholder value. In a March 8 filing with the SEC, Driver claimed Republic First’s total shareholder return since Hill became chairman has been a negative 30.47%.
For his part, Hill has noted that Republic First’s fourth-quarter earnings of $6.1 million were up 49% year over year and he has pointed to continued momentum in 2022.
