Irving Rejects Hostile Bid, Strengthens ‘Poison Pill’

NEW YORK — Irving Bank Corp. said that Friday its board of directors rejected Bank of New York’s sweetened bid and took steps to prevent the hostile suitor from acquiring a larger stake in the bank.

Meanwhile, both companies have turned to the courts for help in the bitter7-month-old battle.

In a special 2 1/2-hour meeting late Thursday, Irving’s board refused to rescind its “poison pill” takeover defense, a condition under which Bank of New York had proposed to raise the stock portion of its $1.1-billion hostile offer.

Instead, Irving said, the directors amended the defensive provision so that it would be activated should someone acquire at least 20% of Irving shares on the open market. The poison pill previously would have gone into effect in the event of a takeover not supported by management.

Bank of New York spokesman Owen Brady said: “The action taken by Irving’s board . . . is clearly invalid.”

The company said it asked the New York State Supreme Court on Friday to act quickly to invalidate Irving’s poison pill. A hearing was set for May 24.

Bank of New York had threatened to proceed with its original tender offer by Tuesday and run Irving as a subsidiary, provided at least two-thirds of Irving’s 18.5 million shares outstanding were tendered.

Depends Court Irving’s management, meanwhile, supports a friendly merger with Banca Commerciale Italiana SpA, a major state-run Italian institution.

“A lot depends now on what the court rules,” said Michael Alpert, a banking analyst with Bear, Stearns & Co. “If it (the poison pill) is ruled valid it will make it more difficult for the Bank of New York to acquire Irving unless there’s a negotiated settlement.”

Poison pill defenses are designed to discourage takeover bids by greatly increasing the cost of an acquisition. In Irving’s case, existing shareholders would be permitted to buy stock in an acquiring company at about half price.

Brady said that as of Monday, Bank of New York held about 50% of Irving’s stock, including shares it owned or had been tendered to it.

Also Friday, Irving filed suit in U.S. District Court against the Bank of New York alleging that its unwanted suitor was in violation of federal securities laws by failing to notify shareholders of the financial ramifications of its amended offer. It said Bank of New York also failed to disclose the effects of its proposal to operate Irving as a subsidiary.

Bank of New York, which holds a 4.9% stake in Irving, had offered to raise the stock portion of its bid to 1.675 Bank of New York shares from 1.575 shares, adding $3.20 per share to the deal and pushing its value to around $1.2 billion. The $15 cash portion would remain the same.

A Rival Offer The proposal came after Irving announced a preliminary proxy count showed that its shareholders reelected its board of directors, rejecting a rival slate put forward by Bank of New York. The hostile suitor has since questioned the results and says it may file a formal challenge.

Banca Commerciale, Italy’s second-largest bank, is offering $75 a share for 9.5 million Irving shares, or about 51% of the stock outstanding, for a total of about $707 million. The bid is p1634890784 Irving said in a statement Friday that it was in “active discussions with BCI concerning improvement in its offer and has been advised by BCI that it is considering an improvement.”

In composite trading on the New York Stock Exchange, Irving closed down 37.5 cents to $60.125 while Bank of New York rose 25 cents to $30.125.