Iâ€™ve blogged before about Soveriegnâ€™s proposed acquisition of Community Bank and related stock issuance to Santander. Sovereignâ€™s largest shareholder, Relational Investors, is against the deal and petitioned the NYSE to block it (see here). The NYSE declined. I applauded the NYSE for this decision (see here), largely because it enforced its rules as written and interpreted to date instead of changing them in the middle of the game. (Note that the NYSE is now considering closing the loophole utilized by Sovereign (see here)). After failing with the NYSE, Relational then filed a lawsuit against Sovereign and Santander seeking a declaratory judgment that the deal constitutes a “control transactionâ€? under Pennsylvania corporate law (see here).
Harkening back to the 1980s where states quickly passed anti-takeover legislation to protect takeover targets headquartered in their states, Pennsylvania has amended its corporate code to remove the Sovereign deal from the definition of â€œcontrol transaction” (see here). Pennsylvania obviously does not have a problem with changing the rules in the middle of a game. And it is somewhat ironic, because in this situation Pennsylvania is actually loosening an anti-takeover statute to aid the Philadelphia based Sovereign.