Bay Bancorp Merger Misleading Registration Statement Securities Class Action

Bay Bancorp, Inc. has entered into a merger agreement under which it would be acquired by Old Line Bancshares, Inc., but the complaint for this class action alleges a large number of material omissions from the Form S-4 Registration Statement filed by the company with the Securities and Exchange Commission (SEC). These omissions, it says, are violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934.

The class for this action is public stockholders of Bay Bancorp, Inc.

Bay is a savings and loan holding company and the parent of Bay Bank. It focuses on small and medium-sized commercial and retail businesses as well as business professionals and the general public in central Maryland through a network of eleven branches. It also originates mortgages and sells them on the secondary market.

The merger agreement signed on September 27, 2017 provides for Bay’s shareholders to receive  

Between 0.4047 and 0.4600 shares of Old Line for each share of Bay that they own, according to a formula based on current prices of Old Line stock.

The complaint’s first claim is that the Registration omits information for both companies’ financial projections and valuation analyses as performed by Bay’s financial advisors, RP Financial and Hovde Group, and Old Line’s advisor, FIG Partners. The complaint compiles a list of missing information, including financial projections for Old Line—crucial, the complaint claims, because Bay stockholders will not receive cash but shares of Old Line. Also, it claims that FIG used financial projections for Bay that were “explicitly adjusted by Old Line and Fig” but did not disclose the original, unadjusted information.

The complaint also claims that the Registration Statement omits information about potential conflicts of interest of the advisors. For example, one of Bay’s directors, S Hovde, is also the President and CEO of Hovde Group. Also, after soliciting advice from Hovde Group and another firm, Keefe, Bruyette & Woods (KBW), a Special Committee decided to ask for a fairness opinion from a third advisor (RP Financial), but it also decided to limit its choice of bankers to Hovde and KBW. According to the complaint, neither of these decisions is explained, nor is the final selection of Hovde as financial advisor over KBW.

Also, the complaint claims that not enough information is given about confidentiality agreements, for example between Bay and five other financial institutions. Since the Registration Statement admits that at least one other party submitted two offers to acquire Bay, the complaint claims that shareholders need more information on whether this company or others have been prevented from making superior offers for Bay.

Finally, the complaint alleges that stockholders need more information on which members of the board voted for the transaction, because of the absence of one member on an important day and because of the potential conflicts of interest of S. Hovde and E. Hovde.

Article Type: Lawsuit
Topic: Securities
Tags: Mergers or Acquisitions, Providing False or Misleading Information, Registration Statement, Securities