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Sovereign Investor Gets the Exchange's Ear

A bank shareholder asks the Big Board to block a stake sale to Spain's Santander.


New York Stock Exchange

is giving consideration to a request that it block

Sovereign Bancorp's


proposed sale of a $2.4 billion equity stake to Spain's

Banco Santander

, a source says.

A person close to the NYSE says the exchange hasn't rejected the request from

Relational Investors

out of hand, even though the Big Board has little history of interceding in the proposed sale of stock by a listed company.

On Tuesday, Relational, a $6 billion asset management firm that owns 7.3% of Sovereign's stock, filed a 38-page letter asking the NYSE to require Sovereign to seek shareholder approval for its plans to sell a 19.8% equity stake to Santander, one of Spain's largest banks.

Relational, which is Sovereign's largest shareholder, is leading an investor campaign to block the Santander deal and a related acquisition in which Sovereign plans to buy New York-based

Independence Community Bank


for $3.6 billion.

Relational contends the sale to Santander was designed to circumvent an exchange regulation that mandates shareholder approval for any deal involving the sale of a 20% equity stake. Santander is buying a 19.8% equity stake, but has the option to later increase its equity interest to 24%. San Diego-based Relational says the deal effectively brings about a change of control at Sovereign, something that requires shareholder approval.

For its part, Sovereign insists the sale to Santander is perfectly legal. A Sovereign spokesman said the bank stands by its earlier statements that the deals were negotiated in an appropriate manner.

Rodgin Cohen, a well-known banking attorney who's representing Relational, says he can't recall anyone else ever filing a similar request with the NYSE. But, he adds, the situation involving Sovereign is unique.

"I don't think it's a total shock you haven't seen this before," says Cohen, a partner with the firm Sullivan & Cromwell.

Meanwhile, Relational's campaign got a boost Wednesday when

Franklin Mutual Advisors

, a subsidiary of

Franklin Resources

(BEN) - Get Free Report

, formally called on the NYSE to scuttle the Santander and Independence deals.

Sovereign's second-largest shareholder said it sent a letter to the NYSE asking it "to either reject the agreements in their entirety," or order the bank to seek shareholder approval for both transactions.