Bank of N.Y. Vows to Continue Bid for Irving

Bank of New York Co. said Tuesday that it would not abandon its seven-month hostile effort to acquire Irving Bank Corp., even though it lost a crucial proxy battle for control of the rival banking company.

Bank of New York said it would sweeten its outstanding $1-billion tender offer by increasing the stock portion of the deal if, among other things, Irving agrees to hold friendly talks and dismantle its “poison pill” anti-takeover defense by May 20.

Alternatively, Bank of New York said if Irving refused to negotiate it would buy the shares already submitted under its tender offer and operate Irving as a subsidiary until the acquisition could be completed under state banking laws.

Irving spokesman David Santos said the bank holding company had no immediate comment. But banking analysts said it was doubtful that Irving would agree to negotiate with its hostile suitor in light of its proxy fight victory.

“It doesn’t surprise me that the Bank of New York has amended the tender offer,” said Michael Starr of Duff & Phelps in Chicago. “I would expect they (Irving management) will continue to respond as they had in the past.

“Realistically, Irving is in the position now to dictate the outcome of the situation.”

Irving announced Monday that an early count of proxies submitted at its May 6 annual shareholders’ meeting showed a slate of 16 incumbent directors was reelected over Bank of New York’s nominees. The final results are expected to be released at a reconvened meeting May 24.

By reelecting Irving’s directors, shareholders are supporting the company’s defensive restructuring plan and friendly merger with the state-run Banca Commerciale Italiana SpA, Italy’s second-largest bank. The proposal was made as an alternative to Bank of New York’s hostile tender offer, which expires at midnight EDT May 24.

Bank of New York, which owns a 4.9% stake in Irving, is offering $15 in cash and 1.575 shares of its stock for each of Irving’s common shares outstanding. The offer is valued at around $64 a share or $1.1 billion.

Banca Commerciale is offering $75 a share for 9.5 million Irving shares, or about 51%, valued at $707 million. In addition, it said it would pay shareholders interest on the purchase price from May 31 until the deal closes.

The Banca Commerciale bid is part of a complex restructuring plan that includes asset sales, cost-cutting measures and a $10-a-share special cash dividend. Irving said the offer has a total value of between $65.20 and $72.55 a share.

Bank of New York said it would be willing to raise the stock portion of its bid to 1.675 Bank of New York shares, adding $3.20 per share to the value of the deal, or around $1.2 billion.

The offer would be amended only if Irving removes its poison pill, as it already has done for Banca Commerciale. The poison pill, which would make an unsolicited merger prohibitedly expensive, takes effect if an unfriendly suitor buys more than 5% of Irving’s shares.

Bank of New York also is asking Irving to take action to render New York’s anti-takeover law inapplicable. The law would prevent an unfriendly merger of the two banks for at least five years.

“We’re optimistic we can work something out here,” Bank of New York Chairman J. Carter Bacot said in an interview. “They profess to be in an auction. Here’s a chance for them to get a higher bid.”

Bacot said that if Irving refused to negotiate, Bank of New York would buy the Irving shares tendered as of May 24 and operate the bank as a subsidiary for five years, thereby avoiding the poison pill.

Bank of New York said it owned or had been tendered about 62% of Irving’s 18.5 million outstanding common shares.

In composite trading on the New York Stock Exchange, Irving closed up 75 cents to $61.375 while Bank of New York fell 87.5 cents to $31.125.