Baltimore Bancorp merger complete

November 30, 1994|By David Conn | David Conn,Sun Staff Writer

One week after Baltimore Bancorp's shareholders voted to approve the company's $346 million sale to First Fidelity Bancorp., the checks can finally be mailed.

New Jersey-based First Fidelity said yesterday that it officially completed the merger. That means Baltimore Bancorp shareholders will receive $20.75 in cash for each of their shares within the next few weeks.

It also means that many of the 3,449 stockholders will have to deal with an unwanted bonus come April 15: a hefty capital gain to list on their income taxes.

One taxpayer, however, might have to file an extension with the IRS.

First Fidelity last week filed suit against Harry L. Robinson, the former chairman of the 176-year-old Baltimore company, opposing his claim to more than $1 million in stock options.

In the complaint, filed separately in federal court downtown and state court in Towson, First Fidelity asserts that Mr. Robinson is owed either nothing at all or at most about $500,000.

For long-suffering Baltimore Bancorp shareholders, who were disappointed when Mr. Robinson and the company's board rejected a proposed 1990 merger offer of $17 a share from First Maryland Bancorp, yesterday's news represented a payoff that's been a long time coming, even if it carries a taxable price tag.

At the shareholders' meeting last week, Baltimore Bancorp Chairman Edwin F. Hale Sr. fended off pointed questions from shareholders who said they would have preferred a tax-free exchange of stock. After the meeting he said to one, "If this were a perfect world, this would close in the first quarter of 1995, and then Newt [Gingrich] would come in" and cut the capital gains tax.

Mr. Gingrich, the Republican House speaker-to-be from Georgia, may yet cut the gains tax, but unless it is retroactive, it will come too late for Baltimore Bancorp's shareholders, some of whom bought the stock at its low of $3.875 a share in January 1991. The stock hasn't traded above $20.75 a share since May 1987.

"There's no question about it, I would have liked to have seen a tax-free exchange," said stockholder John R. Hershey Jr., a senior vice president and director emeritus of Ferris, Baker Watts Inc., in the company's Hagerstown office.

"But it's a good deal for Baltimore Bancorp shareholders," he said. "It's a good price, even a little higher than I would have expected."

First Fidelity will send a form to all shareholders later this week. When the forms are returned, tendering the shares, the checks will be mailed.

For customers of Baltimore Bancorp's subsidiary, the Bank of Baltimore, the merger means they now can do any kind of banking transaction at any First Fidelity branch in four states: Maryland, Pennsylvania, New Jersey and Connecticut.

It will be several months before First Fidelity, which is based in Lawrenceville, N.J., will be able to consolidate its merger with Baltimore Bancorp, and change all the signs and customer accounts. The acquisition brings First Fidelity's assets to about $35 billion, with almost 700 branches in five states. The lawsuit against Mr. Robinson centers on his claim to options on more than 125,000 shares that he was granted while he served as chairman of the company, and as part of his severance in June 1991. That's when he lost a proxy fight against Mr. Hale for control of the board of directors.

First Fidelity's claim, filed last week in U.S. District Court in Baltimore and in Baltimore County Circuit Court, says Baltimore Bancorp terminated Mr. Robinson's stock options in June 1992. The company reiterated its rejection when Mr. Robinson indicated he would try to exercise some of those options in November 1993.

The complaint states that Mr. Robinson, in a letter he wrote to First Fidelity this month, asserts that the New Jersey company now owes him nearly $1.2 million, which represents the merger price of $20.75 minus the average exercise price of his options, or $11.37, for each of the 125,222 shares his options entitle him to receive.

First Fidelity has two alternative suggestions for the court. One is that Mr. Robinson be paid about $500,000, based on an exercise of the options a year ago when he was rebuffed by the bank. The second is that he be paid nothing at all, based on an exercise in June 1992, when Baltimore Bancorp first canceled the options. At that time, the company's stock traded at $7.375 a share, and all of Mr. Robinson's options had an exercise price higher than that.

"They're not alleging anywhere that Baltimore Bancorp was right in terminating" Mr. Robinson's options, said his attorney, Phillips P. O'Shaughnessy. "They're simply asking, what's the price tag for this behavior?"

First Fidelity's attorney, Douglas A. Fellman, in response to Mr. O'Shaughnessy's assertion, said: "A strong case exists that Mr. Robinson is entitled to no money, and certainly there is no basis in law for the seven-figure sum he apparently is claiming."

A separate lawsuit filed by six former Baltimore Bancorp executives this spring, seeking the right to exercise their stock options, was settled for an undisclosed amount this year.

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