A 'Sad Day' at Sovereign

The odds might have just turned prohibitive for dissidents trying to force management change at Sovereign Bancorp(SOV).

The bank, which last night agreed to modifications of its $2.4 billion equity sale to Spain's Banco Santander, now has the blessing of the New York Stock Exchange for a transaction that also includes the acquisition of Independence Community Bank(ICBC).

In stripping out some of the deal's most odious provisions, Sovereign not only kept the Big Board's regulators from interfering, it made it more difficult for angry shareholders to force out top brass.

Legal experts say the NYSE did Sovereign a favor in recommending that the bank amend the Santander transaction. Parts of it had previously read like long-term employment contracts for Sovereign's CEO Jay Sidhu and the bank's directors.

The revised terms probably put enough polish on the deal to enable it to pass muster with any court or other regulatory agency. Donald Langevoort, a securities law professor at Georgetown University, says that given the deference courts usually show to privately negotiated transactions, it's unlikely the deal will be blocked.

It now seems there's little to stop Sovereign from going forward with its controversial sale of a 19.8% equity stake to Santander without holding a shareholder vote. That also means a green light for the Philadelphia-based bank's simultaneously announced a deal to buy Independence.

Wall Street traders on Wednesday certainly responded as if the dual-transactions were a done deal.

Shares of Sovereign at midday trading were down 72 cents, or 3.2%, to $21.94. The bank's stock is almost back to the price at which it closed on Oct. 25, one day after the deal was announced but before the dissident campaign began gathering steam.

Independence's stock, which had been sliding the past few weeks in the face of mounting opposition from Sovereign shareholders, was trading sharply higher on the news of the NYSE's approval. In midday trading, the thrift's stock rose $1.77, or 4.6%, to $39.84. That's a few dollars below the proposed $42-a-share purchase price.