It took more than four years to accomplish but a group of investors led by wealthy Middle Easterners has gained control of Financial General Bankshares Inc., the multibank holding company based in the District.
Two stockholders from New York claim they still hope to block the takeover, but as one confident Financial General official remarked, "They can't unscramble that egg."
In a last-minute, seemingly futile undertaking, the two stockholders--Irving Kas and Helen Sonenshine--have challenged the new owners in a class action lawsuit demanding that they disclose more information about their resources and backgrounds in support of the offer.
Moreover, the investors' offer of $33.80 a share for Financial General's common stock is "inadequate" says an attorney for the two dissident stockholders.
The tender offer for the company's shares was scheduled to end yesterday, but was extended another 10 days. In fact, the investor group's control of Financial General was assured weeks ago. It has acquired more than 90 percent of the stock through the tender offer which began in early March.
The Middle Easterners, led by Kamal Adham, adviser to the Saudi Arabia government, began buying shares in Financial General in 1968 but were forced to suspend their stock purchases when the company's management learned of their intention and sued to block a takeover.
After one of the longest and most complex corporate takeover struggles on record, Financial General agreed to drop litigation, allowing the investors to proceed. Along the way, the Middle Easterners convinced federal regulators and more reluctant state officials that they had satisfied banking and securities laws and that the acquisition should proceed.
Kas and Sonenshine obviously don't agree. In fact, one of the grounds for their challenge is a claim that Adham and the others failed to disclose adequately their financial connections and the source of some of their funds in the offer to buy stock that was sent to shareholders.
FGB Holding Corp., the new parent of Financial General, is required to make "full, fair and truthful disclosure," insists Samuel Philip Sporn, an attorney for the New York stockholders.
The fact that state and federal regulators have already approved the disclosure during the four-year legal battle for control of Financial General is irrelevant, he maintains.
"The issue might have been raised and resolved in prior litigation but it doesn't satisfy the present situation," said Sporn.
Given the present situation, Sporn's clients appear to be more concerned about the price that was offered for their shares and the fact that Financial General's Class A stock wasn't included in the offer.
"The $33.80 they offered really is on the low side," said Sporn. "We feel that it could have and should have been better."
Even though they're unhappy over the price offered for the common stock, Sporn's clients are asking that a tender offer "equal to that of the common shares be made to the shareholders of the Class A common."
FGB indicated in its offering circular that it might or might not seek to acquire Class A shares. Those 592,569 shares carry only one-tenth the voting power of the 6.6 million shares of common that command 10 votes each.
Financial General's common stock was selling in the $12 range four years ago when the Middle Easterners became interested in the company. The investors, however, had paid as much as $15 a share for some of their earlier purchases.
In an acquisition agreement two years ago, the Middle Easterners stated they would pay $28.50 a share and that if Financial General's book value increased they would raise the offering price.
"We have paid a substantial premium over the book value of the company and it was a price which was negotiated at arm's length with management," says Robert A. Altman, a Washington lawyer who represents the Middle Easterners and who has been named president and a director of FGB.
The First Boston Corp., retained as financial adviser by Financial General, concluded earlier this year that the FGB offer of $33.80 a share is "fair."
Sporn believes Kas and Sonenshine have "an excellent chance" of winning their suit but Altman disagrees and legal observers familar with the long history of the fight for control of Financial General side with him.
"We have reviewed the complaint with meticulous care and have concluded that it has no merit whatsoever," says Altman.