Second suitor had eyes on Sovereign, it says

WASHINGTON - Sovereign Bancorp Inc. received an offer last month from an unidentified party to acquire the bank for almost $4 billion in cash, about double the current bid by Banco Santander SA.

The bidding party included former Sovereign chief executive Jay S. Sidhu, according to two people familar with the matter, speaking on condition of anonymity. Sidhu, who couldn't be reached for comment late yesterday, oversaw Sovereign's expansion into Massachusetts before he was ousted by the bank's board in 2006.

Santander, the Spanish bank that already owns just under 25 percent of Philadelphia's Sovereign, is buying the remaining shares through a stock swap that values the US bank at about $1.99 billion. Santander forged the deal amid investor doubts about Sovereign's asset quality and capital adequacy.

"There were concerns at a number of banks about where the next round of capital was going to come from," said Joseph Fenech, an analyst at Sandler O'Neill & Partners LP, in New York. "That played a role in some of the transactions we saw at some pretty low valuation multiples."

A Sovereign spokeswoman declined to comment.

Santander's offer, now equal to about $2.99 a share, represents a discount to Sovereign's tangible book value of $5.16 a share on Sept. 30, according to Bloomberg data. Banks have traditionally sold at a premium to tangible book value, Fenech said.

The bidder did not identify the private equity co-investors in the letter to Sovereign's board or any source of financing, according to documents filed yesterday with the Securities and Exchange Commission. The letter also requested that Sovereign pay "significant fees" before the suitor was willing to engage in any discussions, including $10 million for a due-diligence review of the bank's financial condition and a "value-enhancement" fee of as much as $95 million.

After consulting with advisers, Sovereign's board was unable to determine whether the unsolicited offer would result in a superior proposal to the Santander bid, according to the filing.

Sovereign's shares, which have fallen by three-quarters this year, rose 40 cents to $3.06.

Ross Kerber of the Globe staff contributed to this report.