Bremer Financial CEO Crain: Directors chose ‘most destructive way’ to try to sell a bank
The leaders of Otto Bremer Trust chose “the most destructive means” in an attempt to sell Bremer Financial Corp. in 2019, the bank’s chief executive said in court on Monday. She later agreed that the trustees had the right to sell it.
Jeanne Crain, who has run St. Paul-based Bremer Financial since 2016, said the announcement of the sale in October 2019 went against the way most companies make deals.
“It was a value-destroying approach,” Crain said. “You 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, leading to an evidentiary hearing that began three years ago. weeks.
Crain’s appearance was one of the key events of the hearing, due to his opposition to the strategy and efforts of the trustees. On Monday morning, she was questioned by Deputy Prosecutor Christopher Burns, who mainly guided her through the timeline of the 2019 deal discussions before the lawsuits were filed.
In the afternoon, attorney for the trustees, Mike Ciresiques, quizzed her about her understanding of the relationship between the two entities – and about efforts decades ago to sell Bremer.
“I had no idea,” Crain said, when Ciresi showed him a 1988 banking document that contained a list of nearly 30 banks and investor groups that Bremer and the Trust executives, working jointly to l ‘time, have solicited on potential deals.
In response to dozens of questions about Crain’s understanding of the trust’s right to sell the bank, Crain admitted she had that right.
During one of these exchanges, Ciresi said, “It was clear to you that they could sell as many shares as they wanted, wasn’t it? “Yes,” Crain replied.
In some of those exchanges, she added that the attorney general’s office and the court that oversees the trust’s compliance with laws governing not-for-profit entities also have the right to challenge a sale or any transaction attempted by the trust. .
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. A significant amount of the bank’s profits were funneled into the trust each year, which distributed them to charities in the four states in which the bank operates: Minnesota, Wisconsin, North Dakota, and Montana.
At the heart of the conflict is a tension that has persisted for years: The trust needs a guaranteed level of profit from the bank each year in order to distribute enough grants to meet federal requirements to operate as a not-for-profit entity. that does not pay tax. .
This level was set during a reorganization in 1989 between the two Bremer entities, which took place after several years of attempts to sell the bank. When asked questions from the two lawyers, Crain said that Bremer Financial fulfilled this obligation and took its responsibility to the charity seriously.
“Reaching the threshold required by the reorganization plan is something that we have always had confidence in and the ability to do,” Crain said.
She said she holds monthly meetings with the three trustees and understands their top priorities are to preserve earnings dividends and diversify the trust’s investments.
At one of those meetings in March 2019, Crain informed the directors of a phone call from the CEO of Great Western Bancorp Inc, based in South Dakota. through a transaction structure known as a merger of equals.
Crain mentioned this same plea to the Bremer Financial board at its April 2019 meeting. The board, which included all three of Otto Bremer at the time, decided to continue exploring.
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.
“It severed the relationship between the trust and the bank,” Crain said. “It seemed very contrary to what Bremer was.”
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. But disagreements continued to mount between the two sides in August and September.
When the dispute became public 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 far away. from Bremer. .
“I would say it was the most destructive way to continue selling an organization,” Crain said.