Bank gets agreement to wrap up stock deal

Stock in Sovereign Bancorp Inc. fell more than 2 percent yesterday after the company secured an agreement with the New York Stock Exchange over a proposed investment by Grupo Santander of Spain.

The agreement, announced late Tuesday, eliminates any shareholder vote on Santander's 19.8 percent investment in Sovereign, which has 24 banking offices in central Pennsylvania.

Sovereign's larger shareholders had challenged the deal, urging the NYSE to require a vote because the Santander investment would amount to a change in control of the company.

Sovereign said late Tuesday that it amended the deal with Santander to address some of the contentious issues cited by dissident shareholders.

The amendments include the elimination of Santander's veto power over the termination of Sovereign's CEO; the elimination of Santander's requirement to vote its shares in support of Sovereign's board nominees; the addition of a provision that would allow Sovereign to entertain other proposals for a possible buyout of the company; and the elimination of a provision that would have allowed Sovereign's directors to serve for 10 years after any future acquisition of Sovereign.

Under the deal announced last month, Santander will pay $2.4 billion to acquire the 19.8 percent stake in Sovereign at $27 a share. It also has the right to increase its stake to 24.9 percent, and can acquire the entire company after two years at a minimum price of $40 a share.

Sovereign intends to use money from the Santander deal to help buy Independence Community Bank Corp. of New York City for $3.6 billion.

Dissident shareholders complained that the Santander deal was designed to insulate management from a threatened proxy fight by Relational Investors LLC of San Diego, which owns 7.3 percent of Sovereign's stock.

Four days before Sovereign announced the Santander agreement, Relational told the Securities and Exchange Commission that it would try to unseat two Sovereign board members with its own candidates.

Relational, which led the fight with the NYSE for a shareholder vote on the Santander deal, was not pleased with the resolution.

"It is unfortunate that the NYSE has seen fit to provide a road map for disenfranchising shareholders," said Ralph V. Whitworth, a principal of Relational. "Regardless of how Sovereign attempts to disguise it, this is a transformational transaction on which shareholders should have a right to vote."

Whitworth said Relational is considering an appeal to the SEC over the NYSE's participation in restructuring of the Santander deal.

"We will make this determination in the coming days," he said.

Sovereign stock closed yesterday at $22.17, down 49 cents, on heavy volume of 6.6 million shares.

Philadelphia-based Sovereign is the parent company of Sovereign Bank, which has the third-largest share of deposits in Cumberland, Dauphin and Perry counties. Sovereign gained a large presence in the Harrisburg area with its $950 million stock-and-cash acquisition of Waypoint Financial Corp. in January.

Sovereign Bank has more than 650 branches in the Northeast.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

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