Equitable Bancorporation filed suit in federal court here today against a group of investors who are seeking a 40 percent share of the bank's stock, just hours after the bank's board urged stockholders to reject the takeover bid.
Saying the $43.5 million proposed purchase is "not in the best interests of the company or its stockholders," Equitable Chairman Owen Daly II told the annual stockholders meeting this morning that the bank -- the state's third-largest bank holding company -- would "take any and all steps necessary" to block the bid.
Three investors formed a corporation known as LZH Associates and 10 days ago announced a series of agreements with nine stockholders to buy 1.071 million shares of the company's common stock. On April 10, the group made a tender offer to purchase another 510,000 shares of common stock at $27.50 a share. Equitable closed today on the over-the-counter market with an asking price of 21 1/2. The two purchases would bring the holdings of the firm to more than 40 percent.
The fight is a particularly unusual one because the existing agreements for the blocks of stock are reportedly between the investors group and former bank officers, including Equitable's former chairman, John A. Luetkemeyer Sr., and former president, Robert Merrick.
According to a statement filed yesterday with the Securities and Exchange Commission, Luetkemeyer and his wife sold 95,000 shares of the stock, while Merrick sold another 112,036 to the investment group. Samuel Pistorio, a former bank board member, sold $315,400 shares of the stock.
The statement also noted that Merrick's son is a partner in the Baltimore investment banking firm of Alex. Brown & Sons, a firm that assisted in the negotiations. Alex. Brown will receive a commission of $350,000 for its work.
The unanimous board vote to challenge the takeover bid was made last night during an eight-hour board meeting. Daly said. Noting the then-possible litigation, Daly refused to elaborate on a prepared statement on the stock purchase in comments to both stockholders and reporters. Daly told stockholders that the purchase price proposed by the investors is "inadequate."
Little has been said about the investors beyond materials filed with the SEC. Alfred Lerner, of Cleveland, is chairman of Realty Refund Trust and has been involved in the real estate business.
Until 1980, Zell had been president of Equity Financial Management Co., a real estate company. Zell's business address is in Cleveland. Handy is president of Handy Capital Corp., an investment counseling company.
In the law suit, Equitable is seeking an injunction to block the tender offer, charging that both the offer and the private purchases violate federal securities and federal and Maryland banking law.
Meanwhile, the company announced a sharp rise in first-quarter profits to $2.93 million (74 cents a share) from $1.65 million (42 cents) a year earlier.
Daly attributed the improvement in the bank's profits to a rise in the bank's interest-rate margin, which stands at 5.02 percent. He said the bank would continue to emphasize "floating-rate loans such as business and construction" loans as a way to ensure that the margins between the bank's lending and borrowing rates remain steady.