BR&B Files Lawsuit for NewAlliance Bancshares Stockholders

9/21/2010 - On September 21, 2010, Barrack, Rodos & Bacine filed a shareholder action for the Port Authority of Allegheny County Retirement and Disability Allowance Plan for Employees Represented by Local 85 of the Amalgamated Transit Union on behalf of all public shareholders of NewAlliance Bancshares, Inc. The case names as defendants each member of NewAlliance’s board of directors as well as First Niagara Financial Group, Inc. in connection with First Niagara's proposed acquisition of NewAlliance through a merger. On August 19, 2010, NewAlliance and First Niagara disclosed that they had entered into a definitive merger agreement, which provides that NewAlliance shareholders will receive cash and stock based on a fixed exchange ratio of 1.10 shares of First Niagara stock for each NewAlliance share. Based on First Niagara’s closing price on August 18, 2010, the proposed acquisition was valued at $14.09 [perapproximately $1.5 billion in the aggregate.

The complaint alleges that proposed $14.09 per share acquisition price for NewAlliance shareholders significantly undervalues the company, among other things representing a discount to NewAlliance’s book value of roughly $15 per share. The complaint alleges that the members of NewAlliance’s board of directors breached their fiduciary duties by agreeing to the merger at an inadequate price, and included excessive defensive merger terms in the agreement, to the detriment of NewAlliance’s public shareholders. Moreover, as reported in The New York Times, the merger would allow NewAlliance’s chair and chief executive officer to gain extraordinary benefits, including over $33.8 million for her personal stock holdings and a “golden parachute” valued at $23.4 million. The case is pending in the Connecticut Superior Court, in its New Haven division. 

If you have any questions about this case, please contact BR&B partner Jeffrey B. Gittleman via email at jgittleman@barrack.com.