Trade founder Vernon Hill and Cooper boss George Norcross battle for control of Republic Bank of Philadelphia

Once-allies Vernon Hill and George Norcross engage in what could be a protracted struggle for control of the Philadelphia-based Republic Bank.

Supporters on either side say the two veterans of numerous business battles are bracing for a long fight, with rival lawyers, investment bankers and other advisers ready to dig in for months or more if necessary.

The bank’s shares, which trade on the Nasdaq stock market as Republic First Bancorp under the symbol FRBK, had fallen in value since Hill became chief executive in 2019. But the stock has risen since Norcross and a group of allied investors began calling for Hill’s ousting and other major changes within the bank, starting late last month.

Hill sought to remake Republic in the image of his earlier, much larger company, the former Commerce Bancorp.

Hill boasted that Marlton-based Commerce was “America’s most convenient bank”, with well-staffed tellers and lanes, glass walls and a big red letter logo, all copied by Republic.

At its peak, Commerce operated nearly 500 branches in the New York-Washington corridor. His occasional celebrity pitchmen, including Hill’s golf buddy, future president Donald J. Trump.

But Hill was kicked out after a run-in with banking regulators, during which Norcross and other Commerce executives effectively sided with the regulators. The business was sold to TD Bank — leaving Hill with shares worth $400 million, but also a legacy of bitterness. (Hill went on to found a UK version of Commerce, Metro Bank Plc, where he was forced to resign as chief executive three years ago after admitting he failed to report problem loans.)

At Republic, Hill built a network of 33 branches in Philadelphia, suburbs, South Jersey and New York at a time when most banks are closing branches.

In a series of shareholder letters, Norcross criticized Hill’s expansion strategy, which it called costly and unprofitable, and called for more investment in technology.

A week before Norcross went public with its Republic campaign, Piper Sandler analyst Frank Schiraldi acknowledged Republic’s high spending in 2021 in a report to clients, but said the bank attributed a large portion from that to spending on new technology, and added that revenue had grown faster than spending over the past year.

Other investors were unimpressed with last year’s results. But they responded favorably to Norcross’ attack on Hill by offering the stock above $5 for the first time since 2019, as if investors now saw reason to hope for a more profitable direction. The stock closed Tuesday at $5.33.

norcrossinsurance agency chief Conner, Strong & Buckelew, chairman of Cooper Health and longtime leader of the Democratic Party, alongside allies including former TD executive Greg Braca, raised nearly 10% of the shares of Republic First – almost as much as Hill controls himself.

On the other side, a handful of Hill allies — directors and senior bank executives — bought a relatively small number of shares earlier this month, at below-market prices, filings show. at the US Securities and Exchange. Companies often use these low-priced stocks to reward insiders.

Some directors, including former Philadelphia advertising executive Brian Tierney (and former co-owner, publisher and CEO of Inquirer), have so far kept the newly acquired shares and increased their total holdings, the records show. Tierney is also a board member of The Inquirer.

But other insiders were quick to sell their shares at a bargain price, taking advantage of the rise in Norcross stock price.

Hill and Norcross are both veterans of the battles for control of businesses in the region. In 2003, Hill’s Commerce Bank financed a group led by Norcross in its takeover of an eye care chain, US Optical. Norcross went on to co-own The Inquirer, before being bought out by the late HF Lenfest and Lewis Katz after a court battle for control of the business.

After Commerce, Hill invested in a series of private companies, including two Philadelphia-area employers: restaurant chain Saladworks and pet insurer Petplan, where he engaged in lengthy court battles after falling out with the founders. These struggles ended with the sale of Saladworks and the new management of Petplan.

The Norcross team asked Republic to add Norcross and Braca to their board.

He also urged investors to vote for three insurgent directors nominated by activist investor Driver Management Co. to run against Hill and two of his allies in the upcoming board election – which has not yet been announced. programmed.

“There’s a really clear and urgent need for change at Republic First,” Driver founder and boss Abbott Cooper told The Inquirer on Tuesday.

Cooper said his attorneys are urging Republic to meet in April, as it did last year, for the annual shareholder meeting and board vote, and “not mess with the date. ” in the hope of delaying the elections.

Cooper, whose firm owns about 1.3% of Republic, said the Norcross group has hired top New York talent, including the law firm’s banking law group. Sullivan and Cromwell, a sign that they are serious about challenging Hill.

“They’ve represented so many banks, but I don’t think I’ve ever seen them represent an activist investor before,” Cooper added. “You don’t hire a company like S&C just out of spite.”

He said the wide-ranging nature of the Norcross attack suggests the group is preparing a bold move – perhaps an outright offer to buy the bank, a sale to a bigger bank, or at least a new one. management that will abandon branches and other unprofitable assets and make more technology-backed loans.

Cooper says investors’ hope for change likely explains why the stock has risen since Norcross publicly declared war.

“Vernon has a genius for retail banking” but lends very conservatively, resulting in low profitability and low stock prices, Cooper concluded. “They have to do something with all these deposits. Or it could be the third bank Vernon will be kicked out of.

Hill and his representatives did not comment.

How long can the Republic hold out? To be sure, Pennsylvania corporations enjoy an extra layer of protection against hostile takeovers: the state’s corporate law, unlike that of Delaware and other corporate-favored states, allows boards to directors to do what they think is best for management, employees or communities, not just shareholders.

But in a Feb. 17 letter to investors, the Norcross Group cited another provision of state law, which gives shareholders the right “to inspect the books and records” of a Pennsylvania-based corporation and to demand information to facilitate the task of the insurgents. contact shareholders directly.

According to Cooper, the activist investor, this part of Pennsylvania law strongly favors disgruntled investors by making it easier for them to reach out to potential supporters.

For its part, on Feb. 11, Republic pledged to review Norcross Group’s proposals “carefully and objectively” and is “open to all proposals aimed at maximizing value.”


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