Shareholders sue over Union-Xenith deal

xenith-union

Union plans to acquire Xenith in a $700 million all-stock deal.

The pending marriage of two local banks is now the subject of two lawsuits seeking class action status and attempting to block the deal, part of a legal trend that’s become a kind of rite of passage for most mergers and acquisitions involving publicly traded companies.

A pair of shareholders of Xenith Bankshares, the parent of Richmond-based Xenith Bank, filed lawsuits in Richmond federal court this month claiming the company omitted important information in documents related to its deal to be acquired by local peer Union Bankshares.

Each case claims violations of provisions of the Securities and Exchange Act and seeks to prevent the deal from being consummated.

The cases, which make similar claims and are similarly worded, are in the same vein of others filed when big public company M&A deals are announced. The cases often end with little consequence, either being dismissed or settled after the parties agree to tweak certain disclosures in SEC filings.

Executives of companies see them as little more than the white-collar equivalent of ambulance chasers, but it’s a trend companies are forced to plan for when crafting deals.

Xenith CEO Gaylon Layfield, reached by phone last week, said such lawsuits have become “standard operating procedure” for public companies going through the M&A process.

“We were hopeful that it wouldn’t happen, but not at all surprised that it did,” Layfield said of the filings related to the Union deal.

Gaylon Layfield

Gaylon Layfield

He said he doesn’t expect any material costs related to the litigation, nor does he expect it to have any real effect on the deal.

“We’ve got counsel and we’ll sort through it.”

Few M&A deals have been immune to the trend, including other local transactions. Union dealt with the issue during its acquisition of StellarOne Bank in 2014.

Henrico-based insurance giant Genworth Financial’s pending $2.7 billion deal to be acquired by China Oceanwide has been fuel for several such cases.

The first case related to the Xenith-Union deal, filed Sept. 7 with shareholder Paul Parshall as lead plaintiff, names as defendants Xenith Bankshares, Layfield and directors James Burr, Patrick Corbin, Henry Custis Jr., Palmer Garson, Robert Goldstein, Edward Grebow, William Paulette, Lewis Witt, Robert Merrick, Scott Reed and Thomas Snead Jr.

The suit claims a registration statement filed by Xenith on Aug. 16 “omits material information with respect to the proposed transaction, which renders the registration statement false and misleading.”

Those alleged omissions include information regarding financial projections of Xenith and Union and financial analysis performed by outside advisors on both sides of the deal. The case also questions alleged conflicts of interest related to the financial advisors.

The second suit, filed Sept. 19 with Xenith shareholder Shannon Rowe as lead plaintiff, alleges violations of the same federal regulations concerning a joint proxy filed Sept. 15 by both banks, rather than on the August registration statement.

Both cases seek to prevent the deal from being consummated, rescind it, award damages should it eventually close, and force the defendants to revise the registration statement.

Plaintiffs in both cases are represented by attorneys from Levi & Korsinsky of Washington, D.C., a firm that routinely puts out “shareholder alerts” when a big M&A hits the news wires.

Layfield said the Union-Xenith deal is on track for closure early next year. Both sides are awaiting regulatory approvals and votes from shareholders. Each company has scheduled a shareholder meeting on the matter next month.

The terms of the all-stock deal call for Xenith shareholders to receive 0.93 shares of Union common stock in exchange for each Xenith share they own. That represents a value of $29.67 per share of Xenith stock and a total deal value of approximately $701 million.

xenith-union

Union plans to acquire Xenith in a $700 million all-stock deal.

The pending marriage of two local banks is now the subject of two lawsuits seeking class action status and attempting to block the deal, part of a legal trend that’s become a kind of rite of passage for most mergers and acquisitions involving publicly traded companies.

A pair of shareholders of Xenith Bankshares, the parent of Richmond-based Xenith Bank, filed lawsuits in Richmond federal court this month claiming the company omitted important information in documents related to its deal to be acquired by local peer Union Bankshares.

Each case claims violations of provisions of the Securities and Exchange Act and seeks to prevent the deal from being consummated.

The cases, which make similar claims and are similarly worded, are in the same vein of others filed when big public company M&A deals are announced. The cases often end with little consequence, either being dismissed or settled after the parties agree to tweak certain disclosures in SEC filings.

Executives of companies see them as little more than the white-collar equivalent of ambulance chasers, but it’s a trend companies are forced to plan for when crafting deals.

Xenith CEO Gaylon Layfield, reached by phone last week, said such lawsuits have become “standard operating procedure” for public companies going through the M&A process.

“We were hopeful that it wouldn’t happen, but not at all surprised that it did,” Layfield said of the filings related to the Union deal.

Gaylon Layfield

Gaylon Layfield

He said he doesn’t expect any material costs related to the litigation, nor does he expect it to have any real effect on the deal.

“We’ve got counsel and we’ll sort through it.”

Few M&A deals have been immune to the trend, including other local transactions. Union dealt with the issue during its acquisition of StellarOne Bank in 2014.

Henrico-based insurance giant Genworth Financial’s pending $2.7 billion deal to be acquired by China Oceanwide has been fuel for several such cases.

The first case related to the Xenith-Union deal, filed Sept. 7 with shareholder Paul Parshall as lead plaintiff, names as defendants Xenith Bankshares, Layfield and directors James Burr, Patrick Corbin, Henry Custis Jr., Palmer Garson, Robert Goldstein, Edward Grebow, William Paulette, Lewis Witt, Robert Merrick, Scott Reed and Thomas Snead Jr.

The suit claims a registration statement filed by Xenith on Aug. 16 “omits material information with respect to the proposed transaction, which renders the registration statement false and misleading.”

Those alleged omissions include information regarding financial projections of Xenith and Union and financial analysis performed by outside advisors on both sides of the deal. The case also questions alleged conflicts of interest related to the financial advisors.

The second suit, filed Sept. 19 with Xenith shareholder Shannon Rowe as lead plaintiff, alleges violations of the same federal regulations concerning a joint proxy filed Sept. 15 by both banks, rather than on the August registration statement.

Both cases seek to prevent the deal from being consummated, rescind it, award damages should it eventually close, and force the defendants to revise the registration statement.

Plaintiffs in both cases are represented by attorneys from Levi & Korsinsky of Washington, D.C., a firm that routinely puts out “shareholder alerts” when a big M&A hits the news wires.

Layfield said the Union-Xenith deal is on track for closure early next year. Both sides are awaiting regulatory approvals and votes from shareholders. Each company has scheduled a shareholder meeting on the matter next month.

The terms of the all-stock deal call for Xenith shareholders to receive 0.93 shares of Union common stock in exchange for each Xenith share they own. That represents a value of $29.67 per share of Xenith stock and a total deal value of approximately $701 million.

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