The week began with new developments to a familiar story, the ongoing proxy fight between the Republic First Bank board and an activist investor group headed by South Jersey powerbroker George Norcross III.
After a stretch of relative calm compared to the previous back-and-forth between the warring sides, Monday marked a new chapter and reignition of the proxy battle. (See below for an index of NJBIZ’s complete coverage of this ongoing story.)
To begin, Republic First announced a pause of its planned $125 million capital raise, citing positive impacts from leadership changes and other strategic initiatives – such as the exit of its mortgage origination business and the streamlining of its New York City commercial lending business – that the bank announced earlier in May. First Republic says these steps were taken to improve efficiency in the near-term and support profitable growth within core service markets over the long-term. Because of these factors, the board determined it had an adequate capital position.
The capital raise, announced in March, was being led by Castle Creek Capital and an affiliate of Cohen Private Ventures LLC. In deciding to pause it, the board says it is waiting for market conditions to stabilize before continuing. Initially, the raise was priced at $2.25 per share, well above Republic First’s current stock price, which opened at $1.04 per share on Tuesday.
The board added that it has worked with independent legal and financial advisors to evaluate Republic First’s near-term capital needs in the context of recent turbulence in the banking sector.
“The actions we have taken – and will continue to take – are laying the foundation for a more efficient, profitable business that can create enhanced value for all shareholders and stakeholders,” said Thomas Geisel, president and CEO of Republic First Bank, on Monday. “While recent initiatives are already having a positive impact, they are just the first steps in our strategic realignment of the bank. We remain focused on taking actions to preserve the bank’s capital, strengthen our core business, and position us to identify additional investor commitments at the right time and on the right terms. Protecting Republic’s valued shareholders from excessive and unnecessary dilution is very important to us.”
Shortly after that announcement, the Norcross Braca Group released a strongly worded statement questioning the pause, declaring the resumption of the proxy fight and calling for the removal of several board directors.
The activist investor group has accused the board of reducing its size to entrench current leadership; it is seeking to replace the board members at the bank’s long-delayed annual shareholder meetings, install new management, and resume direct communications with company shareholders.
“We believe it is clear that Harry Madonna, Andrew Cohen, Lisa Jacobs, and Harris Wildstein mismanaged Republic First for years and shareholders are now paying the price for their recklessness and unwillingness to simply do what is right: give up control and get out of the way,” said Greg Braca on Monday. “Recent inaction and failure to raise badly needed capital only proves to us that these four legacy directors care more about their personal interests than they do about Republic First and its future. If they won’t do anything to protect shareholders, we will continue our efforts to do so.”
Last month, a Philadelphia Court of Common Pleas ruled that the Norcross Braca Group would be able to nominate directors to the board at the next scheduled annual meeting, which remains delayed and has not been held in more than two years.
The group says that Braca, a former TD Bank U.S. CEO, will be offered as a nominee to replace current board members Benjamin Duster and Peter Bartholow at the 2022 meeting. They say they will also seek to replace Madonna – Republic’s founder, former CEO and current board chair – at the 2023 meeting, where it will consider additional nominees, in addition to resuming litigation related to what the group alleges is the board’s attempt to reduce its size to protect insiders and legacy members.
The activist investor group says that these actions are being taken to protect shareholders and the bank itself, referencing the stock price. Questioning the move to pause the capital raise, the Norcross Braca Group believes that raising capital at a premium to the current stock price would be beneficial, not dilutive, to shareholders.
“More than a year ago, we first raised the alarm about the poor decision Republic First’s legacy directors made to make long term investments at a time when interest rates were rising,” Braca said. “Now, it should be clear why new capital, and new leadership, are important to Republic First’s future, yet Madonna, Cohen, Wildstein, and Jacobs continue to do almost nothing to fix the problem.”
“For more than a year, Republic has engaged in good faith with the Norcross Braca Group to pursue a compromise that balances the interests of all our stakeholders. In addition to heeding the group’s requests for a strategic review, we have repeatedly offered it board representation and substantial expense reimbursement while also objectively considering its investment proposals,” Republic First told NJBIZ in a statement responding to the renewal of the proxy fight. “The group’s latest round of false and misleading statements is old news, repetitive and is particularly unproductive given our most recent offer to add its only identified director candidate – Mr. Braca – to Republic’s Board, provide seven-figure expense reimbursement and allow them to nominate an independent director.
“We have taken these steps to best serve all of Republic’s stakeholders and avoid the expense and distraction of a proxy fight and the litigation initiated by the group,” the statement continued. “With respect to the group’s investment proposals, Republic’s Board concluded that the bank has adequate capital at this time and does not need to enter into the sort of materially dilutive transaction the group has proposed.”
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