Shareholders Challenge Bank Sale

NEW HAVEN, Conn. (CN) - Shareholders say NewAlliance Bank is selling itself too cheaply to New York-based First Niagara Financial Group, for $1.5 billion. The class action claims the NewAlliance CEO will take home $33.8 million from the deal, and that he and other top bosses "stand on both sides of the transaction," and "are engaging in self-dealing."

Two class actions were filed this week in Superior Court. They claim that NewAlliance CEO Peyton Patterson conspired with his board to "recklessly violate their fiduciary duties." The defendant directors "stand on both sides of the transaction, are engaging in self-dealing, are obtaining for themselves personal benefits, including personal financial benefits, not shared equally by plaintiff or the class," the complaint states.

NewAlliance, founded in 1838, employs about 1,200 people in Connecticut and western Massachusetts. First Niagara, based in Buffalo, offered $14.09 per share, or 1.10 First Niagara shares for each NewAlliance share, or a combination - a $1.5 billion deal.

Patterson owns 2.4 million NewAlliance shares, according to the company's Jan. 31 SEC filing.

The shareholders say the proposed deal is "the product of a flawed sales process not designed to maximize the value of the company's shares to stockholders."

The class is represented by Jonathan Whitcomb with Diserio, Martin, O'Connor & Castiglioni of Stamford.

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