Bank

Amalgamated Bank of Chicago threatens New York namesake with lawsuits

Bank of New York said in the filing that it “has been advised by[the merged Chicago’s]attorney that AIC may seek compensatory damages for an alleged breach of the merger agreement.”

The deal, struck last year for what would have been $98 million in cash, fell apart abruptly last month. Unusually, there was no provision in the merger agreement for a severance fee to be paid to the Chicago bank if the New York buyer walked away.

The agreement, like most such agreements, requires both parties to make “commercially reasonable efforts” to obtain regulatory and shareholder approvals. Any legal battle is likely to assess whether the New York-based bank has done its best to win approval from the Federal Deposit Insurance Corp., which sources say has raised concerns about Community Reinvestment compliance. Act.

Amalgamated of New York said in the filing that it “denies breaching the merger agreement and intends to vigorously defend such claims.”

But in another SEC filing earlier this month, the New York-based bank made it clear that its decision to cancel the deal was not without risk. He warned of the potential to “materially and adversely affect our business” due to costly litigation, bad press and negative investor and customer backlash.

The merger seemed natural when the two banks announced it in September. Both banks were created in the early 1920s by the same union of garment workers. They were created to serve workers and unions. The New York bank is publicly traded, while the Chicago bank is majority owned by the family of CEO Robert Wrobel.

The Bank of Chicago serves approximately 900 unions and many municipal governments. Syndicates account for well over half of its deposits and 13% of its loan portfolio, according to investor disclosures last year by the New York-based bank. Amalgamated of Chicago had over $1 billion in assets as of December 31.

Amalgamated of New York last year touted the merger as a consolidation of its self-proclaimed status as the “largest socially responsible bank” in the United States. It is therefore ironic that the deal died due to apparent demands from regulators for concessions related to the Community Reinvestment Act, which aims to improve access to banking services in low-income areas.

A spokeswoman declined to confirm whether the Chicago bank had sent a letter and provided no further comment.

For Wrobel, who worked for the Chicago bank for 50 years and is in his early 70s, the deal’s demise is a financial blow. Through a series of unusual transactions, he and his family were expected to make a profit of around $50 million on a $4 million investment in the takeover of Amalgamated of Chicago just 14 years ago.

Observers do not believe that any other buyer is likely to match or even come close to the sale price offered by Amalgamated of New York.