Bremer Financial CEO Crain: Directors chose ‘most destructive way’ to try to sell a bank
Otto Bremer Trust executives have chosen “the most destructive means” in an attempt to sell Bremer Financial Corp., which manages Minnesota’s fourth largest bank, openly saying they are looking for buyers in 2019, the CEO said on Monday. from the bank during a court hearing.
Jeanne Crain, who has run Bremer Financial, which has been based in St. Paul since 2016, said the announcement of the sale in October 2019 went against the way most companies make deals.
âIt was a value-destroying approach,â Crain said. âYou are just alerting the market that you need to sell, that you are almost desperate to sell. You need a controlled and confidential process. “
A dispute between the trust, which owns the bank under a single deal, and Bremer executives over the direction of the company raged behind the scenes for months in 2019, erupting into the light of day. with the announcement of the sale of the trust on October 28.
Weeks later, the bank took legal action, claiming that a sale would violate the wishes expressed by bank founder Otto Bremer in a 1940s document that defines the relationship between the charity and the bank. . More lawsuits were exchanged before the Minnesota attorney general’s office, which oversees charitable trusts, intervened.
Ramsey County District Judge Robert Awsumb agreed to hear the state’s petition to remove the three trustees ahead of the other cases, which led to the evidentiary hearing which began there. three weeks.
Since the death of Otto Bremer in 1951, the trust has been the primary owner of the bank. But due to federal laws, it has no control over its operations. Almost all of the bank’s profits went to the trust each year, which distributed them to charities in the four states in which the bank operates: Minnesota, Wisconsin, North Dakota, and Montana.
Crain’s appearance is one of the key events of the hearing, due to his role in opposing efforts by the trustees to sell the trust’s stake and, by extension, the company. On Monday morning, she was interviewed by Deputy Attorney General Christopher Burns, who mainly guided her through the timeline of the deal discussions.
They started in early 2019 when an investment bank introduced Crain to the CEO of South Dakota-based Great Western Bancorp Inc. time, through a transaction structure known as a merger of equals.
Crain mentioned this to the Trustees and then to the Board of Directors of Bremer Financial at its April 2019 meeting. The Board of Directors, which included the three directors of Otto Bremer at the time, decided to continue to to explore.
But at the next board meeting in late June, the directors said they couldn’t agree to a merger of equals and wanted to sell the trust’s stake in the bank. In his testimony on Monday, Crain said the trustees’ turnaround had “stunned” him.
âIt severed the relationship between the trust and the bank,â Crain said. “It seemed very contrary to what Bremer was.”
At the next board meeting at the end of July, things got more heated when Brian Lipschultz, one of the directors, questioned the desire of the other directors to maintain the bank’s relationship with his bank of investment. He wanted an outside investment bank hired by the trustees to make a deal.
Crain said she objected at the meeting to the directors’ characterization that the bank was “pursuing” a merger with Great Western, which the directors had used to justify hiring their own investment bankers.
“We weren’t looking for a fusion of equals,” she said. “We were just discussing it. It was a conversation we were having. It was not something we agreed to.”
The July meeting minutes show that Lipschultz agreed to tell the trust bankers not to seek any buyers until the directors meet again. But in early August, the trustees informed Bremer Financial that its investment bankers had received a letter of interest from another bank, BMO Harris. Crain said this showed him that the trust advisers “were actively shopping at the bank.”
No formal offer was made, however. The letter from BMO Harris did not provide monetary value on a potential transaction, Crain said.
In testimony prior to the hearing, the trustees seemed to agree that it would be difficult to find a buyer if the management and directors of Bremer Financial were unwilling to agree to a deal.
On Monday, Crain said that because financial services is a relational business that depends on the skills of employees, executives on all sides of a deal are interested in retaining talent.
When the dispute erupted with the announcement by the trustees on October 28, 2019 that they were pursuing a sale, Crain said she immediately feared employees were worried about their future and that competitors would try to hire them in Bremer. . She emailed the entire company and set up a conference call with all employees to address concerns that afternoon.
âI would say it was the most destructive way to continue selling an organization,â Crain said.