An unusual bidding war for a small Massachusetts thrift is escalating again.
An investor in the $300 million-asset Westborough Bank - who is eager to stop a merger it has in the works - last week fattened his offer to buy out the publicly traded shares to $24.6 million in cash, or $41 each.
That is 3% more than he offered a month ago and 17% more than Assabet Valley Bancorp in Hudson, Mass., would pay under its pending deal for Westborough.
Miffed by what he called the "cursory dismissal" of his first offer, the investor, Marc J. Bistricer of Toronto, said in a sharply worded letter to Westborough executives last week that he fears they are intent on going through with the merger for their own personal gain. He threatened legal action to stop the deal.
Roughly 36% of Westborough's stock is publicly held. The rest is owned by its mutual holding company, Westborough Bancorp.
Mr. Bistricer argued in his letter that Assabet's offer of $20.6 million in cash, or $35 per share, works out to less than 70% of Westborough's book value, if it were to do a second-step stock offering to go fully public, compared with his offer of roughly 96% of book value.
The merger agreement with Assabet awards $2.5 million in cash bonuses, consulting agreements, accelerated vesting of equity, and other benefits to Westborough's president and chief executive officer, Joe MacDonough; the chief financial officer, John Casagrande; and board members, Mr. Bistricer noted. These awards are "shockingly" high, he said, exceeding 10% of the amount that the public shareholders would receive. Money is essentially being "withdrawn from the pockets" of shareholders and "deposited" into officers' and directors' pockets, he said.
Mr. MacDonough said Friday that the board would meet today to begin discussing Mr. Bistricer's new offer.
"He's made a proposal. It's different than the last proposal he made, so literally we go back to the table," Mr. MacDonough said. "We've scheduled a meeting, and we will discuss it."
He declined to comment on anything Mr. Bistricer wrote in the letter, including the assertions about conflicts of interest.
Westborough has received - and rejected - two higher offers since announcing Nov. 14 that it had agreed to sell itself to Assabet. An offer of $38.50 per share came from an unnamed bidder in December. Mr. Bistricer, who said he and a group of investors he represents own 9.9% of Westborough's publicly held shares, offered $40 per share on Feb. 28.
After receiving a rejection letter to that first offer last week, Mr. Bistricer immediately upped his offer - and the vitriol.
His spokesman, Keith Zakheim, said Westborough officials never asked to meet with Mr. Bistricer or called with any questions, despite taking 20 days to reject his first offer.
"As the letter strongly indicates, we don't believe it was the offer that was rejected. We think the CEO and the board are not interested in doing anything other than this merger for reasons of self-interest," Mr. Zakheim said. (Read the
The letter pointed out that Mr. MacDonough would receive a change-in-control payment of $330,000 and a yearend bonus of $250,000 for 2006, according to Westborough's Securities and Exchange Commission filing about the merger. Mr. MacDonough also would succeed Assabet's retiring president and CEO and receive a five-year employment contract at an initial salary of $210,000 per year.
Mr. Casagrande would receive a change-in-control payment of $126,000 and a three-year consulting agreement at $120,000 for the first year, $100,000 for the second year, and $40,000 for the third year.
Westborough's board members would receive full vesting of equity awards, and most would get seats on Assabet's board.
Mr. Zakheim said that the merger agreement compels Westborough to pay a 5% penalty, or $1 million, if at any point it considers another offer that is not "superior" to Assabet's. How an offer might qualify as "superior" is left undefined, he said, and the penalty clause took effect immediately, without giving Westborough any time to shop around.
"It's virtually unheard of that right away there's a $1 million penalty, without having a 'go shop' period," Mr. Zakheim said.
The rejection letter Westborough's lawyers sent to Mr. Bistricer said that the board met March 12 to discuss his offer of $40 per share and determined that it was not "superior" to Assabet's.
This letter said Westborough's merger with Assabet would produce a stronger financial institution and benefit the community - advantages absent from Mr. Bistricer's proposal.
The board also objected to giving Mr. Bistricer a majority of its seats, questioning whether this would be legally permissible for a mutual holding company. It cited the uncertainty of regulatory approval, given that no similar transaction has ever been done.
It also said that the deal with Assabet is nearly complete and that jeopardizing it for Mr. Bistricer's offer, made more than three months after the merger announcement, could adversely affect shareholders.
In his new offer, Mr. Bistricer made concessions in response to Westborough's letter, including offering to accept a minority of board seats.
