Security Pacific Denies That It Violated Confidentiality Agreement in Bass Deal
Security Pacific National Bank denied Wednesday that it violated a confidentiality agreement with Macmillan Inc. when it agreed to help finance a proposed $1.9-billion hostile takeover of the New York publisher by Robert M. Bass Group.
The response came after Macmillan Chairman Edward P. Evans, in a letter Tuesday to Security Pacific Chairman Richard J. Flamson III, accused the Los Angeles bank of misusing confidential information that it received before committing $200 million to help finance a restructuring of Macmillan to fend off the Bass Group.
In the proposed restructuring, Macmillan would be split into two publicly traded companies and pay special dividends of about $1.36 billion to its shareholders.
Indicating in the letter that Macmillan might sue Security Pacific, Evans demanded that the bank withdraw its loan commitment to Bass Group “so that I will not have to turn this matter over to our lawyers to pursue.â€
In another development Wednesday, Delaware Chancery Court Judge Jack B. Jacobs heard arguments from Bass Group asking him to invalidate Macmillan’s restructuring, but he did not issue a decision. Bass is seeking a court order to block the restructuring, alleging that it would make Macmillan invulnerable to takeover.
In his letter, Evans said Macmillan was “outraged†to learn last week that the bank agreed to issue a $500-million commitment to Bass Group as the lead bank in a four-bank syndicate.
“Surely, Security Pacific would not issue a one-half billion dollar commitment without reviewing, considering or analyzing the materials (that Macmillan gave to Security Pacific),†Evans said.
Macmillan’s criticism of Security Pacific is reminiscent of a similar dispute in 1985 in which the bank was accused by Unocal Corp. of a conflict of interest when the Los Angeles oil company was battling an investment group headed by Texas oilman T. Boone Pickens Jr.
In that case, Unocal sued Security Pacific, its principal bank, accusing it of breach of contract when it agreed to lend the Pickens group $185 million. Unocal claimed that the Pickens group would use the money to try to take over the oil company. Unocal also accused Security Pacific of “directly or indirectly†disclosing confidential financial information about Unocal to the Pickens group.
Pickens failed to take over the company, and Unocal dropped the lawsuit.
Richard A. Warner, a Security Pacific executive vice president, said Wednesday that Security Pacific did not misuse confidential Macmillan information because the Macmillan and Bass loan agreements were handled out of different offices.
“The Macmillan deal came in through our New York office. The Bass deal came in through the Chicago office,†Warner said.
Asked whether Security Pacific planned to scrap the Bass agreement, Warner said: “The bank plans to keep all of its commitments.â€
Warner said doing business with conflicting sides in a takeover fight is “not necessarily†a conflict of interest. Because the nation’s largest banks finance most major mergers and acquisitions, he said, it is not unusual for them sometimes to arrange agreements with different sides.
“Most of the major banks wind up in that position at one time or another,†Warner said.
Representatives of Bass Group could not be reached for comment.
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