Shipping entrepreneur Edwin F. Hale Sr. has apparently won his fight to take over Baltimore Bancorp, the parent company of the Bank of Baltimore, according to preliminary vote counts released yesterday.
Mr. Hale won 5.37 million votes from shareholders for a proposal to expand the company's board of directors to 28 members from 18, a move critical to his gaining control of the company. The company's management convinced the owners of 5.03 million shares to vote no.
"The numbers work out to 52 [percent] to 48 [percent]," said Daniel H. Burch, a New York proxy solicitor advising Mr. Hale. He said that about 83 percent of the company's 12.8 million shares had been voted, with each shareholder getting one vote per share owned.
"It was a little closer than I expected it to be," Mr. Hale said. "It hasn't really sunk in exactly what it all means. We've been fighting it for seven months. Now that it's over, it's going to take a day or two."
If the vote is certified, it will mark the first time a publicly traded U.S. bank has been taken over in a hostile proxy fight, according to Dennis Gingold, a Washington lawyer representing the insurgents.
Management sent out mixed signals about whether it was ready to give up.
"These numbers are only preliminary, and significant changes are not unusual," company Chairman Robert F. Comstock said in a statement. The statement said that management will review the results carefully.
But experts on both sides of the proxy fight said that it would probably be impossible for management to get enough votes thrown out to change the results. The two sides are to meet Monday at the Wilmington, Del., office of Corporation Trust Co., the Delaware firm that counted the votes, Mr. Burch said. Both sides will get to inspect the ballots and decide whether to challenge any.
"This will be wrapped up" after the meeting at Corporation Trust, said Mr. Gingold. He said that management's lawyers had called to congratulate him on Mr. Hale's victory. "It's been a hell of a war. It's nice to be on the winning side."
Since Mr. Hale and his backers had won six of the 18 existing board seats in May, he will lead a 16-member majority of the new board if the results stand up, giving him control of the state's fourth-biggest bank. Mr. Hale's slate pushed through a proposal in May to put 10 Hale-backed candidates in the new seats if they were created.
Mr. Gingold said that the new board majority will call a special meeting the day after the voting results are certified and will replace Mr. Comstock.
Mr. Hale, owner of a barge company called Hale Container Line Inc., a trucking company called Port East Transfer Inc., and the Baltimore Blast soccer team, will become chairman, and former Signet Bank/Maryland executive Charles H. Whittum Jr. will become chief executive, Mr. Gingold said.
"There has been no indication that anyone but the chairman and chief executive [Mr. Comstock] would lose his job," Mr. Gingold said."There's a need for stability."
Mr. Hale, 44, said that he has called Baltimore Bancorp President Jack Haigh and told him "he should tell people to lighten up and go about their jobs, that the fight was over and there weren't going to be any mass firings."
"There won't be wholesale changes in personnel, or wholesale changes in the way the bank is operating at this point," Mr. Hale said. "And I emphasize, at this point."
The Hale camp had been predicting it would win by between 200,000 and 400,000 votes, so the margin was within expectations.
But Mr. Hale had said he believed the estimates were HTC conservative.
The victory will end 17 months of bickering between the company and its shareholders. The already-prickly relationship worsened after the company stiff-armed an April 1990 $17-a-share acquisition proposal from First Maryland Bancorp, the owner of First National Bank of Maryland.
Capitalizing on anger over management's handling of First Maryland's offer, Mr. Hale launched his bid for control in April. After he wonsix board seats in May, the rest of the directors forced out former CEO Harry L. Robinson, convinced that Mr. Comstock could do a better job of persuading voters to support management in the second round of voting.
But Mr. Comstock had his own problems. His purchases of company stock before a better-than-expected earnings report sparked an investigation by the U.S. Securities and Exchange Commission, and he announced that developers who owed the bank $30 million had stopped making interest payments, forcing a loss for the current quarter.
The May election ended in confusion and bickering, as the two sides asked a federal judge to decide whether shareholders had approved the resolution to expand the board -- and turn the company over to the Hale group.
The problem was that management had sent out proxy ballots before Mr. Hale announced his challenge or proposed expanding the board. Since management's ballots didn't include any direct way to vote against expanding the board, the in cumbents had to rely on a claim that management had discretionary authority to vote the shares of stockholders who had supported management on other issues as also being against the board expansion.
Disputes over discretionary authority led Corporation Trust to adjust its original count in the May vote on expanding the board by about 500,000 votes in management's favor. After the case went to court, U.S. District Judge J. Frederick Motz ordered the new election, saying it was impossible to know how the holders of more than 1 million other shares had intended to vote on expanding the board because of another dispute over management's discretionary authority.
Judge Motz's ruling didn't affect the election of the six Hale-backed directors to the existing board seats.
But in the second election no votes were cast under discretionary authority, so the issue that helped management thwart Mr. Hale's apparent May victory doesn't exist.
Asked if the incumbent board would go to court to try to invalidate the new vote, Executive Vice President Jerome P. Baroch said, "I don't think there's any real interest in doing that." Asked if there were any remaining legal issues the bank could raise, he said, "I don't think there are, but I don't think we've made any final decisions on that either."
Baltimore Bancorp's stock closed at $8.50 a share yesterday, up 12 1/2 cents.