Cadence Financial Corp. has tentatively settled a lawsuit accusing the directors of the Starkville-based bank of misleading shareholders for personal profit.
In a statement filed this week with the Securities and Exchange Commission, the bank said that it agreed to reveal new details of how it sought new investors and potential buyers for the bank.
The suit, filed in New York on Oct. 28, revolved around the agreed sale of Cadence to Community Bancorp LLC in September. The deal pays shareholders $2.50 cash per share, while an alternative deal with Trustmark Corp. would have provided shareholders with Trustmark stock valued at $2 per share.
Cadence shareholders will vote to approve the sale of Cadence to Community Bancorp at a meeting in Starkville on Dec. 9.
The bank was criticized in the lawsuit for using Keefe, Bruyette, Woods, Inc., which was Cadence”s financial adviser, to perform the in-house evaluation of whether or not to sell the company, and failing to disclose how many banks and investors had been contacted by Cadence about a sale.
According to Cadence”s filing on the lawsuit settlement, Cadence began approaching private investors in July who might have been interested in providing capital or acquiring the bank. Twelve potential investors were contacted, the bank said.
KBW also contacted five banks “that would, based on their financial and regulatory capital positions, be able to consummate a transaction with Cadence,” the bank said.
The class action suit, brought by Cadence shareholder RSD Capital, alleged Cadence Chairman and Chief Executive Officer Lewis Mallory Jr., President and Chief Operating Officer Mark Abernathy, Cadence Financial Corp., Community Bancorp LLC, and 10 additional members of Cadence”s board of directors concealed details in a proxy statement to public shareholders in order to complete “a transaction which protects and advances the interests of Cadence”s management team who are using this opportunity to benefit themselves.”
Donna Rupp, communications manager for Cadence, said in October that the suit was “without any merit.”
Cadence”s directors were accused of selling the company because it was unable to repay the government $44 million received through the Troubled Asset Relief Program. However, the suit stated Mallory and Abernathy stand to receive three times their base salaries and one year”s worth of medical premiums after turning over control, but will remain employed if the previous payments violate regulations.
In its filing Thursday, Cadence says that KBW used a “Selected Peer Group Analysis” formula to find investors and buyers, based on companies with “shared similar business characteristics,” including their location, types of customers served, and the size of the companies” businesses.
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