First Citizens BancShares Inc. is pushing back in court against KS Bancorp Inc.'s attempt to defend itself from hostile bids.
On Feb. 15, First Citizens filed a lawsuit against KS Bancorp and its board of directors in North Carolina's Superior Court, asking that the court force KS Bancorp to terminate its newly adopted 10-year shareholder plan. First Citizens alleges the shareholder plan is discriminatory, and has thwarted transactions between willing shareholders.
It also alleges a share repurchase plan is "protecting and further entrenching" KS Bancorp's management and board. The case has been assigned to North Carolina Business Court.
KS Bancorp put the shareholder plan into place in hopes of stopping First Citizens from acquiring ownership through open-market transactions. Such protections are known as "poison pills."
Under KS Bancorp's shareholder plan terms, each shareholder will receive a right to buy additional common shares at 50% of the then-current market price if any person or group acquires more than a 15% stake in the company. The rights will be voided for the entity that crossed the ownership threshold.
In 2017, Raleigh, N.C.-based First Citizens publicly released its bid to buy KS Bancorp, a $373.6 million institution based in Smithfield, N.C.
The offers were rejected by KS Bancorp's board, the Federal Reserve Bank of Richmond approved First Citizens' application to acquire shares of the company, and indirectly acquire a controlling interest in subsidiary KS Bank Inc. According to the court filing, the Federal Reserve granted First Citizens permission to acquire up to 80% of KS Bancorp's outstanding stock, but only until March 19.