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TierOne's largest shareholder not in favor of merger with CapitalSource
By Lisa Kerner
Charlotte, N.C., Nov. 14 - TierOne Corp. investor Private Capital Management, LP said it plans to vote against the company's proposed merger with CapitalSource, Inc. at the shareholders meeting on Nov. 29. TierOne also plans to vote against any adjournment of the meeting.
Private Capital, on behalf of its clients, holds more than 9% of TierOne's outstanding shares, making it the company's largest shareholder.
In a Nov. 9 letter to TierOne's board of directors, Private Capital said the stock and cash offer of some $34.00 per share is now a "totally inadequate deal price for TierOne shareholders" given the market's current view of CapitalSource.
The $24 million termination fee prevents the board from reversing its recommendation to shareholders to approve the merger, Private Capital noted in the letter.
According to TierOne, CapitalSource's share price has dropped from over $25.00 per share to less than $16.00.
"Given the uncertainties we see regarding CapitalSource's current prospects and the material reduction in its share price, we are of the strong view that the proposed transaction is no longer in the best interest of TierOne shareholders. We expect to share our views with other TierOne shareholders over the coming weeks," Private Capital chief executive officer Bruce S. Sherman said in the letter.
As previously reported, in May CapitalSource agreed to acquire TierOne, which is TierOne Bank's holding company, in a stock and cash transaction valued at about $652 million, or $34.46 per share. The actual value on consummation of the transaction will depend on CapitalSource's share price at closing.
The agreement calls for each TierOne share to be exchanged for $6.80 in cash plus 0.675 of a share of CapitalSource. Stockholders will receive an additional 0.405 of a CapitalSource share if CapitalSource's stock price, based on a 10-day trading period prior to closing, is less than or equal to $25.1852.
TierOne Bank is a $3.4 billion federally chartered savings bank located in Lincoln, Neb.
CapitalSource is a commercial lending, investment and asset management business based in Chevy Chase, Maryland.
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