Stockholders of Edwardsville-based First Clover Leaf Bank have filed a proposed class action against the company's board of directors over their recent decision to be acquired by Mattoon-based First Mid-Illinois.
Lead plaintiff Jonathan Raul brought the suit May 20 in Madison County Circuit Court; Wood River attorney Tom Maag and Granite City attorney Joshua Lifshitz represent plaintiffs.
Board members allegedly breached their fiduciary duties because the deal to sell to First Mid-Illinois, announced April 26, resulted in an "inadequate" price and a "grossly unfair" merger process. The cash and stock transaction is valued at approximately $90 million, the suit claims.
Defendants include First Clover Leaf president and CEO Dave Kuhl, as well as board chairman Gerard Schuetzenhofer and board members Kenneth Highlander, Gary Niebur, Dennis Terry, Mary Westerhold, Joseph Gugger, Mona Best Haberer and Joseph Stevens. The banks are also named in the suit.
The suit claims the deal provides that shareholders may elect to receive either a .495 share of First Mid-Illinois common stock per share of First Clover Leaf common stock or $12.87 in cash per share of First Clover common stock - "subject to proration such that 25 percent of First Clover shares will be exchanged for cash and 75 percent for First Mid-Illinois stock."
"The agreed upon consideration is inadequate in light of First Clover's intrinsic value and stand-alone alternatives going forward," the suit claims.
It further states that First Clover Leaf had been performing well and "was poised for success."
The suit cites an April 28 article in Capital Cube that states the bank is "undervalued," and has done better than its overall peer group.
Plaintiffs claim that board members compounded their alleged breaches by agreeing to deal protections that unreasonably favor First Mid-Illinois, and which preclude other bidders from making successful competing offers.
Defendants allegedly agreed to:
-a strict no-solicitation provision that prevents First Clover Leaf from providing confidential information to or even communicating with potential competing bidders except under extremely limited circumstances;
-a provision that provides First Mid-Illinois with three business days to match any competing proposal in the event one is made;
-information rights that require First Clover Leaf to share highly sensitive information about potential competing proposals with First Mid-Illinois; and
-a provision that requires First Clover Leaf to pay First Mid-Illinois a termination fee of $3.6 million in order to enter into a transaction with a superior bidder.
"These provisions substantially and improperly limit the Board's ability to act with respect to investigating and pursuing superior proposals and alternatives including a sale of all or part of First Clover," the suit states. "The preclusive effect of these deal protection provisions thus exacerbates and aggravates the Board's utter failure to value-maximizing pre-agreement market check or auction process."
Plaintiffs seek to enjoin the vote on the proposed transaction, or in the event the deal is consummated, recover damages resulting from the defendants' alleged breaches of fiduciary duty.
Madison County Circuit Court case number 16-L-703.