Sovereign/Santander Deal Amended; NYSE Signs-Off

Posted by Bill Sjostrom

As I discussed in this post, Sovereign Bancorp's largest shareholder, Relational Investors, had asked the New York Stock Exchange to require Sovereign to put the sale of a 19.8% stake to Spanish bank Santander to a vote of Sovereign shareholders.  In a press release yesterday (click here), Sovereign reported that following some changes to the deal with Satander, the NYSE will not be requiring a shareholder vote.  According to the press release, these changes include the following:

-The elimination of both Santander’s veto with respect to the termination of Sovereign’s chief executive officer and the requirement that any new chief executive officer be reasonably acceptable to Santander.
-The elimination of Santander’s obligation to vote its Sovereign shares in favor of Sovereign’s board nominees.
-The addition of a fiduciary out to provisions in the Agreement that prohibit Sovereign during the pre-closing period from responding to acquisition proposals from third parties and a $200 million termination fee payable to Santander if Santander elects to terminate the Investment Agreement as the result of Sovereign entering into an acquisition agreement with a third party.
-The elimination of provisions providing for the continuation on the Sovereign board of directors of Sovereign’s directors in office at the time of any future acquisition of Sovereign by Santander for an additional 10-year period.

This article indicates that Relational and other institutional investors are considering an appeal to the SEC, although its unclear on what grounds.  If these investors really believe, as this Reuters article reports, that "Sovereign designed the three-way deal to dilute their voting power, entrench CEO Sidhu and other management and directors, and fend off a proxy fight,"  why aren't they pursuing a breach of duty of loyalty claim in state court?