Hanmi Financial has filed a lawsuit against SWNB Bancorp in Houston and its directors, claiming they “orchestrated a scheme” to ensure that a planned acquisition did not survive a vote of the bank’s stockholders, according to a copy of the lawsuit.
The breach of contract suit, filed Oct. 2 in federal court in Texas, alleges that SWNB directors actively advised investors to reject the $76.7 million cash-and-stock deal.
Hanmi spokesman Lasse Glassen declined to comment on the lawsuit, instead referring to an Oct. 3 filing with the U.S. Securities and Exchange Commission.
Hanmi Financial is the holding company for Hanmi Bank, which has about $5.4 billion in assets. Hanmi is seeking a $3.12 million termination fee from SWNB, which has about $411 million in total assets, with six branches spread over Houston, Dallas and Austin.
Hanmi announced an agreement to acquire SWNB as part of an effort to expand its market share and scale in key markets in Texas through SWNB’s retail branch network strategically located in communities with large Asian-American populations.
Hanmi outlined the importance of getting a vote of confidence in the merger deal from the SWNB board as a way to encourage stockholder approval and generate community support by “sending a positive message” to SWNB’s existing and potential customers that the merger would be in their best interest.
Hanmi alleged that SWNB’s board of directors first sought to renegotiate the terms of the merger after the May announcement and then “surreptitiously fought to terminate” the agreement by actively advising stockholders to vote against the deal.
SWNB Chairman Chao-Kuan “C.K.” Lee could not be reached for comment.
The merger was supported in a July 12 proxy statement provided to SWNB stockholders, but by Aug. 8 – nearly a week short of the scheduled Aug. 16 stockholder vote on the merger – SWNB notified Hanmi that SWNB’s board of directors had recommended to its stockholders to vote against the deal.
SWNB’s board “either sought an opportunity to extract more” from Hanmi by “throwing the merger into doubt or simply experienced seller’s remorse,” the lawsuit states. “In either case, SWNB’s board thoroughly repudiated the merger agreement.”
Hanmi made a revised offer to buy SWNB on Aug. 14, changing the allocation of stock and cash from 80 percent Hanmi stock and 20 percent cash to 70 percent Hanmi stock and 30 percent cash.
A key SWNB director and stockholder, Chen Lee – who holds 1,023,341 shares – did not show up for the Aug. 16 shareholders vote, even though he was required to attend. By the end of August, SWNB shareholders voted against the merger, and then moved to replace its leadership team. George Lee, the newly appointed CEO, claimed the bank was “here to grow.”
Christopher McGratty, a banking analyst with Keefe, Bruyette & Woods, wrote recently that the collapse of the deal probably means Hanmi will begin buying back stock, “which we believe is a good use of capital.”
Hanmi shares traded at $24.94 at market close Oct. 4, down about 24.7 percent from its 52-week high of $33.10 on Dec. 4, 2017.
Finance reporter Pat Maio can be reached at email@example.com or (323) 556-8329.