Tuesday, August 12, 2014

First Citizens seeks to dismiss merger lawsuits

Raleigh-based First Citizens BancShares is seeking to dismiss two lawsuits stemming from the merger it proposed in June with Columbia, S.C.-based First Citizens Bancorp.

The city of Providence, R.I., has filed both lawsuits on behalf of itself and other shareholders.

In the first lawsuit, the city wants to make invalid a change that First Citizens BancShares announced to its bylaws the same day it announced the planned merger.

The bylaws change requires certain types of legal actions against the company to be filed in North Carolina courts, unless First Citizens BancShares approves otherwise. Legal actions covered by that requirement include claims that the bank's directors, officers and employees breached fiduciary duties.

In the second lawsuit, the city is challenging the merger itself. The city claims, among other things, that Raleigh-based First Citizens' board of directors structured the merger so that it primarily benefits Columbia-based First Citizens, enriches the Holding family and increases the family's controlling interest in the Columbia bank, according to regulatory filings.

Frank Holding Jr., chairman and CEO of the Raleigh bank, is also a shareholder of the Columbia bank. Members of the Holding family own approximately 48.5 percent of the outstanding shares of the Columbia bank's common stock, according to regulatory filings.

Under terms of the deal, each share of the Columbia bank's common stock can be converted to the right to receive 4 shares of the Raleigh bank's Class A common stock and $50 in cash. Alternatively, each share of the Columbia bank can be converted to the right to receive 3.58 shares of the Raleigh bank's Class A common stock and 0.42 shares of its Class B common stock.

The merger is expected to close in the fourth quarter. It is expected to create the largest family-controlled bank in the U.S. and the sixth-largest bank headquartered in the Southeast.

A First Citizens BancShares spokesman said the bank does not comment on pending litigation.