Although Peter A. Langerman is not on the board of Pennsylvania based Sovereign Bancorp, he is making his outrage at chairman Jay S. Sidhu known to its voting members.
Langerman, head of Franklin Mutual Advisers, has publicly condemned Sidhu's plans to expand the company without an investor vote prior to the move, according to a report from The Philadelphia Inquirer. The news is another example of the increasing power that mutual funds, as holders of large blocks of company shares, can have over corporate decision-making. Franklin Mutual has a 3% stake in Sovereign.
In a letter filed with the Securities and Exchange Commission, Langerman accuses Sidhu of getting rich at investors' expense, as well as building a financial empire. The challenges coming from Langerman are based on Pennsylvania law and New York Stock Exchange rules, which Sidhu allegedly violated. Sidhu says that the deal he plans is in the best interest of shareholders and that it doesn't violate any exchange rules because the Sovereign board has a wide control over the corporate decisions.
Sidhu recently unveiled a plan to sell 20% of the company for $2.4 million to Grupo Santander. Santander said it may want to buy more shares later, and that it would not replace Sidhu. After the deal goes through, Sidhu is planning on purchasing the Independence Community Banks of New York, at a price that's raising a few eyebrows.
"[Sidhu's plans] rank with the worst examples of management and board entrenchment and disdain for shareholder rights that we have witnessed in our history as public investors," Langerman said. Langerman said further that the deal is a way for Sidhu and his board to "insulate themselves from an increasingly unhappy shareholder base and disenfranchise the true owners."
A separate filing by Relational Investors, which owns 7% of Sovereign shares, demands extensive financial records, including those denoting transactions with Sovereign's execs as well as corporate and advisory board members.