Ameriana shareholders sue over First Merchants buyout terms

Ameriana Bancorp shareholders have filed a lawsuit against Ameriana's board and First Merchants Corp., alleging the terms of the sale to First Merchants are inadequate and unfair.

On June 29, Muncie-based First Merchants announced it was buying New Castle-based Ameriana for $69 million, or $22.71 a share—a 45-percent premium over its previous closing price of $15.68. Ameriana shareholders, led by lead plaintiff Shiva Stein, allege that price was inadequate and that language in the merger agreement deters higher bidders. The plaintiffs asked the court to stay the deal.

"The proposed transaction is designed to allow First Merchants to wrongfully wrestle control of the company away from Ameriana's shareholders and into its own hands for an inadequate price," the complaint, filed in Marion Superior Court, said.

The suit, which seeks class action status, was filed earlier this month. Attorneys at Indianapolis-based Price Waicukauski & Riley, which filed the complaint, deferred comments to attorneys at New York-based Pomerantz Law, who couldn't be reached for comment.

Attorney David Tittle of Bingham Greenebaum Doll LLP, which represents First Merchants, said these kinds of lawsuits are routine.

"It's standard practice in today's world that any time there's a merger announced, it immediately draws a shareholder lawsuit, regardless of the business and the circumstances," Tittle said.

"I can't go into the defenses, but I can tell you that we intend to very vigorously defend the case."

The plaintiffs didn't indicate in the suit what would constitute a fair price. But they argued Ameriana is hamstrung from drawing out other suitors because the merger agreement contains a no-solicitation provision and requires Ameriana to pay a $1.5 million termination fee if it scraps the First Merchants deal.

"The reason behind these deal protection devices is clear: [T]he absence of a meaningful premium for shareholders increases the potential for a third party bidder to attempt to usurp first Merchants and submit a higher bid for Ameriana," the complaint said.

The plaintiffs also objected to a lack of a price collar in the all-stock deal, which would protect Ameriana shareholders if First Merchants' stock price were to fall sharply before closing. Under the deal, Ameriana shareholders would exchange each of their shares for 0.9037 share of First Merchants stock.

Both companies have seen their stocks move up since the merger announcement. First Merchants shares were trading around $26 midday Tuesday, up from a close of $24.68 the day of the announcement.

Mike Renninger of the Carmel-based banking-advisory firm Renninger & Associates, said deal-protection clauses, including termination fees, are common and that the $69 million offer seems fair.

"From an industry specialist perspective, that was a fair deal and generally normal terms that I'm aware of." 

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