Posted 1/13/2014 12:00 am
Updated 9 months ago
A $3.8 million buyout of minority shareholders in First Union Financial Corp. of Monticello has developed into a lawsuit in Drew County Circuit Court.
The holding company for the $187.5 million-asset Union Bank & Trust of Monticello last month sued 11 stockholders who said no to a buyout price of $182 per share.
That “fair value” reflects 72.2 percent of the bank’s book value. However, some believe a more fair value for the profitable lender is closer to $352 per share, about 1.4 times book.
“That would not be out of the realm of the market,” said Virgil Trotter, a dissenting shareholder who resigned from the bank’s board of directors. “There have been no negotiations in all of this.”
The defendants in the lawsuit are connected with four families with roots in Monticello.
Named along with Virgil Trotter are William Yates Trotter and Patricia Trotter Kirkland; Deborah Jackson Thornhill, Jimmie Jo Jackson Leech, Charles E. Jackson Jr. and Lucy Jackson Cyphers; Ruth C. Moffatt, William R. Daniels and Marsha Moffatt Daniels; and John Porter Price.
The dissenting shareholders represent a combined 7.7 percent stake in First Union Financial. The case will determine if these shareholders will receive more than $182 per share.
The buyout was initiated by the McClendon family in connection with converting First Union into a sub-chapter S corporation. Though the two moves coincided, the buyout wasn’t necessary to accomplish the conversion. The shareholder roster was already well below the S Corp. threshold of 100.
The McClendons owned 68.4 percent of the one-bank holding company when they started the buyout-conversion ball rolling in July. Those shares were divided among the Zach McClendon Jr. Revocable Trust, 28.77 percent; Zach McClendon Jr.’s son, John McClendon, president of SeaArk Marine Inc., 17.38 percent; his daughter, Robin McClendon, president of SeaArk Boats Inc., 14.77 percent; and Zach McClendon Trust No. 1, 7.48 percent.
Zach McClendon Jr., chairman and CEO of First Union, is the namesake son of the co-founder of MonArk Boat Co. SeaArk’s commercial lineage can be traced back to the 1958 launch of MonArk.
First Union stockholders haven’t received any dividends in more than 10 years, and some of the minority shareholders wonder if the McClendon family’s move is a profitable power play in advance of a lucrative payday.
“I can’t comment while this is in litigation,” said Zach McClendon Jr.
John Porter Price, founder and retired CEO of The Price Cos. Inc. of Monticello and a former Union Bank director, wasn’t happy about the terms of the buyout that forced other minority shareholders out at the $182 per share price.
He asked Zach McClendon if he thought his bank stock was worth only $182 per share. McClendon indicated his shares were worth more than that.
Pending courtroom action will determine if other shareholders are entitled to the same valuation consideration.