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.

The immediate reaction from Sovereign's dissidents was a promise to continue the fight. Just how they intend to do that isn't clear.

"We are disappointed that the NYSE has chosen to allow this transaction to proceed, which disenfranchises the existing owners of Sovereign," said the top executives of Franklin Mutual Advisors, in a prepared statement. "We will continue to consider all available options to us in order to protect the rights of Sovereign's owners.''

Franklin, a subsidiary of mutual fund giant Franklin Resources ( BEN), is Sovereign's second-biggest shareholder.

Officials with Relational Investors, the San Diego-based investment firm that is the bank's biggest shareholder and which began the crusade to upend the Santander deal, were equally vague in outlining their next step. In a prepared statement, Relational, which owns 7% of Sovereign's stock and is trying to elect two of its officials to the bank's board, says it may ask the Securities and Exchange Commission to review the NYSE's decision.

"This is a sad day for the American capital markets,'' said Relational principal Ralph Whitworth. "It reverses two decades of progress. We are considering whether the NYSE's participation in restructuring this transaction and the resulting rule change should be appealed to the SEC.''

But Langevoort says appealing to the SEC is even less likely to succeed than a lawsuit.

"The SEC generally takes a hands-off attitude on the issue of when shareholders can vote,'' says Langevoort. "The courts have said that is a state law issue and not a matter of federal concern.''

An SEC spokesman declined to comment on the Sovereign dispute.

Oddly, Relational Investors and Franklin aren't yet talking about filing a lawsuit to block the deals. But waging a court battle is far more costly and time-consuming than their tactics thus far.

From the start, most had thought the dissidents' overture to the NYSE was unlikely to bear fruit. The NYSE has no history of blocking a corporate deal. Moreover, the Big Board never has been viewed as a particularly tough or adventuresome regulator.

In fact, just hours before the NYSE gave its seal of approval to the amended deal, one of the institutional investors opposing the transaction had urged the Big Board not to settle for a compromise solution like the one announced Tuesday.

"Respectfully, the NYSE can reject or require a shareholder vote on the pending transaction,'' said Orin Kramer, chairman of the New Jersey Investment Council, in a Tuesday letter to NYSE Regulatory Chairman Richard Ketchum. "But a revised transaction eliminating particularly offensive provisions but which amounts to a change in control without a vote will, in our judgment, only intensify the public debate."

The New Jersey Investment Council makes investment decisions for the state's pension system. The NYSE officials declined to comment on the Sovereign matter.

At the moment, the best hope of dissidents may be the intercession of a crusading regulator in the mold of New York Attorney General Eliot Spitzer. But don't look for Spitzer to get involved, especially after a federal judge recently chastised him for trying to probe the home-lending practices of the nation's big banks.

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