Friday, September 14, 2012

Citizens South settles shareholder suit over merger

Citizens South reported Friday that it has settled the shareholder suit brought after it announced its acquisition by Park Sterling in May.

The settlement does not report any money changing hands, but adds numerous disclosures to the narrative of the merger shareholders will use to decide whether to approve the merger, including internal earnings projections should the bank have remained stand-alone.

The new disclosures, reported in a securities filing, are hard to follow because they are to be inserted in the narrative in the securities document outlining the merger.

At the time, Citizens South CEO Kim Price had been negotiating with two other banks about a merger. One new disclosure says that Price had asked one of them whether he would be able to join the board of the combined bank, and told no. Citizens South had previously disclosed that the deal did not work out because it would not happen soon enough.

A table inserted in the merger prospectus also includes a financial analysis that predicted a significant increase in earnings, equity and stock price in the three coming years without a merger. For example, Citizens South had estimated tangible book value per share to increase nearly 50 cents between 2012 and 2013. In a presentation given the day of the merger announcement, the two banks estimated the deal to increase tangible book value per share in four years.

The lawsuit was filed shortly after the merger announcement and granted class action status in early August. The two parties reached an agreement this Wednesday, the securities filing says. It still must be approved by the court.

The plaintiff in the suit is expected to file a petition with the court to be awarded attorney's fees, but the bank said it has a right to fight it.

A shareholder vote to approve the merger has not yet been set.