NewAlliance Sued by Shareholder Seeking More Money in First Niagara Buyout

NewAlliance Bancshares Inc., the bank holding company First Niagara Financial Group Inc. plans to buy for about $1.5 billion, was sued by a shareholder seeking more money in the takeover.

First Niagara, based in Buffalo, New York, said Aug. 19 that it would acquire New Haven, Connecticut-based NewAlliance to form one of the 25 biggest U.S. lenders. Alan Kahn, who owns 3,845 NewAlliance shares, claimed he will be shortchanged in the buyout, according to lawsuit filed yesterday in Delaware Chancery Court.

“The consideration NewAlliance’s public shareholders will receive in the merger is inadequate and unfair,” Kahn said in the complaint. “NewAlliance common stock is trading at depressed levels.”

NewAlliance holders will get either 1.1 shares of First Niagara for each of their shares, or a combination of cash and stock, subject to adjustments, the companies said Aug. 19. The offer represented a 24 percent premium over the previous day’s closing price for New Alliance.

Connecticut Attorney General Richard Blumenthal has said that his office is looking into the combination and its potential effects on jobs and small businesses in the state.

Leslie Garrity, a First Niagara spokeswoman, said she was aware of litigation filed in Connecticut Superior Court and said such lawsuits are “typical of litigation commonly filed when transactions of this nature are announced. We do not believe it has any merit.”

Paul McCraven, a senior vice president for NewAlliance, didn’t immediately return an e-mail seeking comment.

First Niagara fell 19 cents to $11.39 in Nasdaq Stock Market trading at 4:29 p.m. New York time. NewAlliance dropped 21 cents to $12.32 on the New York Stock Exchange.

The case is Kahn v. Patterson, CA5785, Delaware Chancery Court (Wilmington).

To contact the reporters on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net; Dawn McCarty in Wilmington at dmccarty @bloomberg.net.

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