Citing a misguided board of directors, the chairman of Brookline Bancorp’s board resigned this month, issuing a letter that criticized the board and the bank’s CEO for rejecting a takeover bid.
Richard P. Chapman Jr. quit shortly after the bank denied a takeover offer from an unnamed company earlier this month. According to a Feb. 17 letter written by Chapman, the bank’s CEO had initially pitched the offer as being valued at far more than the bank itself could have been worth, even with three to five years of growth.
Yet Brookline President Paul A. Perrault, who succeeded Chapman as CEO last March, changed his mind. He argued that the bank reject the offer and painted a far rosier, overly optimistic view of the bank’s prospects, without providing any evidence to back up his "strategic vision," Chapman wrote in his letter.
"That was a great surprise to me, certainly," Chapman told Banker & Tradesman, referring to the process.
In the letter, Chapman wrote that the decision to reject the offer was "misguided and emotion-driven" and that the process was "deeply flawed."
Brookline Bancorp’s investment bankers were barred from the room as the rest of the board discussed the deal, which Chapman said prevented them from commenting on the board’s analysis.
Chapman and Perrault were banned from sitting in on the board’s executive session. Chapman and Perrault were allowed back in for the open, final vote on the issue, but he said by that point the official vote had become a mere formality.
Ten board members voted to reject the takeover, while only Chapman and one other member voted for it.
"There is no requirement that a vote be taken in executive session, and I regard that procedure as abusive and a maneuver to shut me out," he wrote.
What’s more, the board was erratic in its decision-making, Chapman argued. First it accepted the buyer’s initial offer and then "abruptly terminated" negotiations. When the buyer returned with a much more generous offer, the board rejected it again.
But Chapman reserved the most frustration for Perrault. The board embraced Perrault’s vision for the bank over reams of analysis and data from investment bankers and bank staff that showed the merger was a much better deal, he said.
"Mr. Perrault did not come up with a single piece of paper with a number on it to support his rosy picture. He did, however, verbally suggest earnings of $1.00 per share, over three times the 2009 figure and wildly ambitious. Raising unrealistic expectations often leads to rash decisions," Chapman wrote.
Chapman said he’s gotten calls of support from banking peers and other shareholders, and said that as a major shareholder himself, he has a powerful incentive to act in the bank’s best interests.
Perrault did not immediately return calls for comment.
Brookline Bancorp is the parent company of Brookline Bank, which has $2.5 billion in assets and 18 branch locations. After publicly disclosing Chapman’s resignation and the near-takeover, Brookline’s stock went up 0.19 percent, to $10.47 a share. Analysts noted that this increase shows a potential Brookline sale is not entirely out of the question in the near future.
