Sovereign, largest investor settle dispute
PHILADELPHIA -- Sovereign Bancorp Inc. and its largest shareholder reached a settlement yesterday to resolve a six-month legal battle that arose from a pair of multibillion-dollar deals.
Relational Investors LLC's principal, Ralph V. Whitworth, joined Sovereign's board as part of the accord. Whitworth will be renominated this year for a three-year term.
Sovereign, the nation's third-largest thrift, also will appoint a second new independent director from a group of candidates Relational provides.
''I am pleased to achieve our original objective of obtaining board representation, and I look forward to working constructively with the board and Sovereign's management team to build share value for the future," Whitworth said in a statement.
''We are delighted to have these disputes resolved and put behind us," said Jay S. Sidhu, Sovereign's chairman, president, and chief executive.
Philadelphia-based Sovereign and the investor group have been battling since October, when the company disclosed a deal to sell a 19.8 percent stake to Spain's Banco Santander Central Hispano SA for $2.4 billion, and then acquire Brooklyn, N.Y.-based Independence Community Bank Corp. for $3.6 billion in cash.
Santander would have an option to buy Sovereign outright in 2008.
Relational, which owns about 8 percent of Sovereign's shares worth $600 million, will drop its objections to those deals.
Relational had raised concerns over the bank's governance, including what it called a lack of independence among Sovereign directors that it said, in part, led to the two multibillion-dollar deals.
Relational had also been seeking the support of other shareholders to remove Sidhu as a director of the bank.
Sovereign will hire an outside firm to examine its disclosures, dealings with insiders and other governance issues ''in the context of the practices of the nation's largest financial institutions," the company said.
San Diego-based Relational had filed suit in state and federal courts seeking to block the Santander deal, or to at least force a shareholder vote on it.
The investment fund also sought to oust Sovereign board members in a public fight that had grown particularly rancorous.
