Bank of New York Co. won another legal battle Tuesday in its yearlong, $1.2-billion bid to acquire Irving Bank Corp., as an appeals court struck down a key provision of Irving’s “poison pill” anti-takeover defense.
But Irving said it would ask the state’s highest court, the Court of Appeals, to review the ruling from the New York State Supreme Court’s appellate division.
In its decision, the five-judge appellate panel, without comment, reaffirmed a July lower court ruling that said Bank of New York was unfairly discriminated against by a “flip-in” provision of the poison pill.
The defense would have allowed all Irving shareholders--except a hostile suitor--to buy $400 worth of Irving shares for $200 if any suitor bought more than 20% of Irving stock without the support of Irving’s management. Such devices are intended to make unsolicited takeover bids prohibitively expensive.
Owen Brady, a spokesman for Bank of New York, said the company was gratified by Tuesday’s decision but could not comment on what further action it might take. “We’re reviewing our options,” he said.
Even if it won another appeal round, Bank of New York would not be permitted to merge the two banks because of a New York state anti-takeover law that prevents an unfriendly merger for at least five years. In the interim, it would have to operate Irving as a separate subsidiary.
A judge in state Supreme Court, which is New York’s trial court level, had turned down Bank of New York’s request to force Irving to waive the New York law and redeem its poison pill altogether, and the appellate division upheld that ruling Tuesday.
The appeals court also upheld the results of a proxy vote earlier this year that allows 10% of Irving’s shareholders to call a special meeting and it reaffirmed a ruling that permits Bank of New York to issue new common shares as part of its proposed merger.
Robert A. Falise, Irving’s executive vice president for legal affairs, said that besides the poison pill ruling, Irving would appeal the case involving Bank of New York common shares.
Bank of New York, which owns a 4.9% stake in Irving, is offering $15 in cash and 1.575 shares of its own stock for each of Irving’s common shares outstanding. The offer is valued at around $1.2 billion.
The proposal has received conditional approval from the Federal Reserve Board.
When Bank of New York made its bid a year ago, it had the distinction of being the first hostile takeover fight between two big American banks. It is now also the lengthiest such battle among major U.S. corporations.
During the past year, a “white knight,” Milan-based Banca Commerciale Italiana SpA, offered to merge with Irving. But it recently withdrew the bid after the Fed ruled that the Italian government agency that owned most of Banca Commerciale had to supply financial information in the Irving offer.