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DIME BANCORP, INC.
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July 6, 2000
00/21
FOR IMMEDIATE RELEASE
DIME ANNOUNCES MAJOR INVESTMENT BY WARBURG PINCUS
Tony Terracciano Elected Chairman of Board of Directors
New York -- July 6, 2000 -- Dime Bancorp, Inc. (NYSE:DME) today
announced that, as a result of its review of strategic alternatives, it has
reached an agreement for Warburg, Pincus Equity Partners, L.P. & affiliates to
make a capital investment of $238 million in Dime. Dime also announced that Tony
Terracciano has been elected Chairman of its Board of Directors. Lawrence J.
Toal will continue to serve as Dime's Chief Executive Officer. In addition, Dime
said that its Board of Directors has approved a series of actions intended to
improve returns and provide enhanced value to Dime stockholders, including:
- A "Dutch Auction" Tender purchase of 13.6 million shares, or
approximately 12.5%, of Dime's outstanding common stock, with
a floor of $16.00 and a cap of $18.00, subject to market and
other conditions;
- A distribution to stockholders (excluding Warburg Pincus) of
Dime's economic interest in its pending "goodwill" lawsuit
against the United States government through the distribution
of Litigation Tracking Warrants (LTW(TM)s);
- The adoption of certain amendments to Dime's stockholder
rights plan, including providing an immediate exception for
certain qualifying tender offers and eliminating the rights
plan in its entirety effective after Dime's 2002 annual
meeting of stockholders; and
- Reviewing opportunities to continue to improve Dime's growth
rate and earnings quality through initiatives such as further
investments in technology and higher-margin businesses as well
as balance sheet restructuring and expense reduction.
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"With this transaction, Dime's stockholders are being given two
attractive alternatives. They can either tender into the Dutch Auction and
receive cash value consistent with, if not superior to, the uncertain value
inherent in North Fork's hostile proposal, or they can remain invested alongside
Warburg Pincus and with Tony Terracciano, both of whom have proven track records
of generating superior returns for investors," said Mr. Toal.
Mr. Toal added, "Over the past two months, Dime's Board of Directors
and senior management, together with our financial and legal advisors, conducted
an exhaustive review of the available strategic options to increase stockholder
value. As we analyzed the current market for bank combinations and held
discussions with potential bidders, it became clear to us that the merger and
acquisition market for depository institutions is at the lowest point of
activity in close to a decade and that a sale of the company at this time would
not optimize stockholder value.
"At the same time, our belief that North Fork's unsolicited proposal is
inadequate and not in the best interests of stockholders was confirmed by the
following:
"First, any perceived 'premium' related to the North Fork proposal has
essentially disappeared. This is evident from the fact that, as of yesterday,
Dime's stock price had performed in line with the S&P Thrift index since the day
before North Fork made its proposal at a purported 31% premium to Dime's
then-market price.
"Second, North Fork's stock price has underperformed the S&P Regional
Bank index by 20% during that same period.
"Third, North Fork failed to satisfactorily address the serious issues
and concerns that have been raised during our diligent and on-going review of
its proposal.
"Finally, the fact that Warburg Pincus is willing to invest in Dime in
a non-takeover transaction at values consistent with North Fork's takeover offer
for the company confirms the inadequacy of North Fork's proposal.
"On the other hand, Warburg Pincus is a highly regarded private equity
investment firm with a history of making successful investments in the financial
services industry. Its decision to invest in Dime is a vote of confidence in
Dime's Board, management and strategy and underscores the inherent value of
Dime's franchise. Over the past several years, Dime has significantly improved
the quality and diversity of its earnings while posting fifteen consecutive
quarters of higher operating earnings per share. We expect to continue our
progress by announcing Dime's sixteenth consecutive quarter of increased
operating earnings per share next week."
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Commenting on Mr. Terracciano's election, Mr. Toal stated, "We are
equally pleased that Tony Terracciano has agreed to join the Dime team as
Chairman of the Board of Directors. I have known Tony for over 30 years, and he
is one of the most respected bankers in the nation and an industry leader. His
experience, expertise and counsel will be invaluable as we refine and implement
our strategy."
Mr. Toal added, "Although we determined that a sale of the company in
today's environment would not be in the best interests of our stockholders, we
will continue to evaluate strategic opportunities as they become available. In
order to demonstrate our willingness to consider a sale at the right time and on
the right terms, we are amending and "sunsetting" our stockholder rights plan.
"Very simply, our Board and management remain focused on enhancing
stockholder value, and we look forward to working with Tony Terracciano and
Warburg Pincus to ensure that we grow and optimize the value of our franchise."
Mr. Terracciano said, "My decision to play an active role in Dime
followed a careful review of its record, strategy, operations and, most
importantly, the potential of the franchise. I am convinced that there is an
outstanding opportunity to take Dime to the next level and that stockholders
will be rewarded by the aggressive implementation of Dime's strategy. I have
known Larry Toal and other members of Dime's management team for many years, and
I am confident that we are well-positioned to improve the value of this
company."
Howard H. Newman, Managing Director of Warburg Pincus, said, "We are
impressed with the bank's earnings record and the steps it has taken in
developing more "bank-like" businesses. We believe that the existing platform
offers many opportunities for additional growth in these new businesses and that
the addition of new technology to the mix could accelerate those opportunities."
Kewsong Lee, Managing Director of Warburg Pincus, added, "We have a
strong track record in the financial services industry with investments such as
Mellon Bank, Bowery Savings Bank, and TAC Bancshares. We look forward to
partnering with Dime with the goal of continuing to build its franchise and
creating stockholder value."
Terms of the Warburg Pincus Investment
Key elements of the Warburg Pincus investment include the following:
Structure. Warburg Pincus intends to purchase approximately 13.6
million shares of Dime common stock and an equivalent number of 7-year Dime
warrants with an exercise price of $21.50 for $238 million. In order to satisfy
various legal and regulatory requirements as well as other considerations, the
investment will be initially structured as the purchase of rights for 12.0
million shares of non-cumulative, voting preferred stock representing about 9.9%
of Dime's
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outstanding common stock after such issuance. It is expected that the voting
preferred stock will convert to restricted common stock upon the receipt of
Hart-Scott-Rodino Act clearance and the distribution of the LTWs. Upon receipt
of other necessary regulatory actions, Warburg Pincus will purchase the
remaining shares of voting preferred stock. The preferred stock provides Warburg
Pincus all of the economic rights of a holder of common stock other than the
right to share in any proceeds of Dime's pending goodwill lawsuit against the
federal government through the receipt of LTWs.
Restrictions. Shares of stock and warrants owned by Warburg Pincus will
be restricted from transfer pursuant to, among other things, a schedule whereby
20% of the shares will be freely tradeable after one year; an additional 30%
will be freely tradeable after two years; and the balance will be freely
tradeable after three years. Warburg Pincus has not entered into any voting
agreement with Dime.
Valuation of Securities Sold. In entering into this transaction, Dime's
Board of Directors concluded that Dime is receiving fair consideration for the
securities being sold to Warburg Pincus. In reaching this conclusion, Dime
received fairness opinions from its two financial advisors, Credit Suisse First
Boston and Merrill Lynch & Co., whose analyses indicated that Warburg Pincus was
paying values consistent with the current market value for Dime's common stock
when taking into account, among other things, the transfer restrictions that
Warburg Pincus agreed to, the value of the goodwill lawsuit asset that Warburg
Pincus will not be receiving and the theoretical market value of the restricted
warrants being issued.
Director. Dime agreed that Mr. Newman will become a director of Dime.
In addition, Warburg Pincus will have two Board observers.
Tony Terracciano
Mr. Terracciano has been elected Chairman of the Board of Directors of
Dime Bancorp and a director of Dime's banking subsidiary, The Dime Savings Bank
of New York, FSB. In addition, he is entering into an employment agreement
whereby he will be advising on strategic issues. His career includes service as
Vice Chairman of Chase Manhattan Bank, President and Chief Operating Officer of
Mellon Bank, Chairman, President and Chief Executive Officer of First Fidelity
and, following the sale of that company to First Union Corporation, President of
First Union.
Tender Offer
Dime's Board has authorized the purchase of 13.6 million shares of its
outstanding common stock, which is expected to be accomplished by way of a Dutch
Auction tender offer.
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Based on current market conditions, the tender offer will have a floor of $16.00
and a cap of $18.00. Closing of the tender offer will be subject to a number of
conditions, including completion of the Warburg Pincus investment. Dime expects
to commence the tender offer as promptly as possible.
Stockholder Rights Plan
In order to demonstrate Dime's willingness to consider a sale strategy
at the right time and on the right terms, Dime has amended its stockholder
rights plan in two respects. First, the rights plan will not apply to a tender
offer that has at least a 50% cash component for all shares and sufficient
liquidity in any securities component, provided that the offer receives 75% of
the common shares tendering. Second, a "sunset" provision has been added to the
plan so that it will terminate immediately following Dime's 2002 annual
stockholders' meeting.
Goodwill Lawsuit
Dime plans to distribute LTWs to its stockholders representing the
right to receive, upon exercise of the LTWs, Dime common stock equal in value to
85 percent of the net after-tax proceeds, if any, from Dime's pending goodwill
lawsuit against the United States government. Under the terms of the Warburg
Pincus agreement, Warburg Pincus will not receive any of the LTWs. However, if
the average trading value of the LTWs exceeds a specified dollar threshold in a
20-day period following their distribution, the exercise price of the warrants
granted to Warburg Pincus will be adjusted to reflect their pro rata interest in
any excess.
Franchise Improvement Initiatives
As part of its on-going effort to improve Dime's growth rate and the
quality of its earnings, Dime is conducting a detailed review of its business
plan to identify opportunities to build further momentum in revenue-producing
activities and to make additional investments in technology. These opportunities
include expansion of business banking and development of more comprehensive
e-commerce offerings. At the same time, Dime is reviewing its expense
infrastructure in order to reduce costs and considering various balance sheet
restructuring initiatives, including a sale of a substantial portion of its
portfolio of investment securities.
Dime Bancorp is the parent company of The Dime Savings Bank of New
York, FSB (www.dime.com), a regional bank serving consumers and businesses
through 127 branches located throughout the greater New York City metropolitan
area. Directly and through its mortgage banking subsidiary, North American
Mortgage Company (www.namc.com), Dime also provides consumer loans, insurance
products and mortgage banking services throughout the United States.
Investors are urged to read (1) Dime's solicitation/recommendation
statement filed with the Securities and
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Exchange Commission on Schedule 14D-9 on March 21, 2000 with respect to North
Fork Bancorporation Inc.'s hostile exchange offer, (2) Dime's proxy statement
relating to the 2000 annual stockholders meetings, and (3) Dime's tender offer
statement on Schedule TO when filed with the Securities and Exchange Commission
in connection with Dime's proposed Dutch Auction tender offer, as well as any
amendments or supplements to these statements when they become available,
because they contain important information. Each of these documents has been or
will be filed with the SEC and investors may obtain them for free from the SEC
at the SEC's website (www.sec.gov) or from Dime by directing such request to:
Dime Bancorp, Inc., Investor Relations Dept., 589 Fifth Avenue, New York, NY
10017, telephone 1-212-326-6170, or to Innisfree M&A Incorporated at
1-888-750-5834.
Certain statements in Dime's press releases may be forward-looking. A
variety of factors could cause Dime's actual results and experience to differ
materially from the anticipated results or other expectations expressed in such
forward-looking statements. The risks and uncertainties that may affect the
transactions described above, as well as the operations, performance,
development, and results of Dime's business, include litigation, interest rate
movements, competition from both financial and non-financial institutions,
changes in applicable laws and regulations, the timing and occurrence (or
non-occurrence) of transactions and events that may be subject to circumstances
beyond Dime's control and general economic conditions.
Dime believes that "operating earnings" basis information, when taken
in conjunction with reported results, provide useful information in evaluating
performance on a comparable basis, although operating earnings are not currently
a required basis for reporting financial results under generally accepted
accounting principles.
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