Airing a little more laundry at Brookline Bancorp…

India - Varanasi - 031 - laundry on the ghats

When boardroom disputes threaten to spill out into public, we imagine many a chief executive would love to sweep some of the uglier bickering under the rug. Now we find one that may have partly succeeded.

The company is Brookline Bancorp (BRKL). The spat was over a bid to buy the bank early this year. It spilled into the public eye because two directors resigned noisily in the wake of the board’s decision to reject the deal. And the evidence comes in the form of the directors’ resignation letters, which must be filed publicly, but chunks of which had previously been “omitted pursuant to a request for confidential treatment” — including this barbed bit:

“Of course, it is natural for [bank President & CEO Paul Perrault] to regret the loss of the chance to see what he could accomplish as CEO of Brookline. I also understand that Paul feels badly about the fates of some of his recent hires, including Bob Rose, his college room-mate. I further understand that he is very disappointed with the limitations on his change of control payments by the 280G rule and the unwillingness of *** to pick up the expense.”

Piecing together the full story is tricky, since portions of the letters — filed with an 8-K/A late on Friday — are still excised from the documents. But here’s the gist: Early this year, the board voted 10-2 to reject a bid from an unnamed suitor. To hear the two nay votes tell it in their resignation letters, the investment bankers thought the proposal was good for shareholders; management initially did as well, but then — abruptly, in the dissenters’ eyes — successfully urged a vote against the deal.

Then-Chairman Richard P. Chapman Jr. fired the first volley, on February 22, calling the rejection of the offer “misguided and emotion-driven” following a flawed process and the “abrupt termination of negotiations”; the alternative strategy offered by management, he added, was “unsupported, highly speculative, and in my opinion, self-serving,” and offered without “a single piece of paper with a number on it to support his rosy picture.”

That’s ugly enough, but the very next day, George C. Carner Jr. added his voice to the mix. Already upset over the deal’s demise, Carner was further angered when he received a memo from Perrault to all bank employees saying his fellow dissenter had resigned because “he was dissatisfied with the process by which the Board considered and rejected an offer from another company.” In fact, Carner countered, quoting Chapman, it was also because the offer was “a fine, compelling offer” that “fully satisfies any financial analysis.”

But Carner’s letter didn’t see the light of the SEC’s filing database until March 3, and when it did, it was missing big chunks of a detailed February 1 memo from Chapman to the rest of the board, supporting the deal while it was still in play. Those are the chunks that surfaced late last week, including the aspersions cast on the CEO’s opposition to the deal.

Key details remain missing from the letters in their latest version, including the offer price and the identity of the suitor, but in that memo, Chapman makes the case that matching the deal’s value would require steep annual loan and deposit growth; that the bank is “very vulnerable to rising interest rates”; that the takeover premium in Brookline’s share price was “unsupported by any reasonable earnings metric”; and that the offer represented “a window of opportunity that is highly unlikely to be seen again in the foreseeable future.”

That’s when Chapman raised Perrault’s college roommate and change-in-control payments. “However,” Chapman continued,

“he will be handsomely rewarded by any reasonable standard, and *** will provide him with a consulting contract and will virtually tear up the non-compete. Personal matters such as these, of course, should play no part in our decision.”

All in all, strong words from a sitting chairman, and we aren’t surprised the company wanted to omit the memo in full. Some companies would have taken this opportunity to respond and lay out their case. Brookline didn’t, which at first glance may have seemed like taking the high road. As it turns out, that silence was covering up a good deal of substantive objection the the company’s course. At least more of it is now out in the open.

Image source: McKay Savage via Flickr


See more of what’s in the filings: Check out FootnotedPro, where we highlight unusual opportunities and potential problems well in advance of the market. For more information or to inquire about a trial subscription, email us at