Align Steps Back from JB-BNK Merger Battle, but Demands a "Plan B" [fnMarketWatch]

[Financial News] Align Partners Asset Management has formally withdrawn its request for a review of the feasibility of a merger between JB Financial Group and BNK Financial Group. However, it has not ended its shareholder activism. Instead, it has shifted its focus from whether the companies should merge to board accountability and survival strategies for regional banks. The governance gap between the two boards has also emerged as an issue, particularly after it was confirmed that BNK formally put the merger review proposal to a vote, while JB handled it only as a reporting item.
According to investment banking industry sources on the 10th, Align Partners sent follow-up letters to the boards of JB Financial Group and BNK Financial Group that day. Since both boards had formally concluded that they would not begin a review of the merger’s feasibility, Align decided to respect their decisions and stop demanding a merger review.
In July, Align had asked both companies to form special committees led by independent directors and appoint global investment banks and strategy consulting firms to assess the merger’s strategic and financial feasibility. Both companies rejected the request on July 28.
However, by setting aside the merger option, Align gave the boards a new task. If not merging is the better choice, the boards must explain why and present a long-term survival strategy for the regional banks that could enhance shareholder value more effectively than a merger.
The two companies responded differently. BNK put Align’s proposal on the agenda as a formal resolution and held a vote. Of the eight directors present, two voted in favor of reviewing the merger’s feasibility and one abstained. Although the proposal was rejected, the individual directors’ positions were confirmed through a formal decision-making process.
JB Financial Group, by contrast, handled the matter only as a reporting item and did not hold a separate vote. As Align has questioned not only the merger decision but also the process by which the board handled a strategic proposal from a shareholder, observers say the issue could affect future assessments of the board’s governance.
After the two companies made their decisions, Align reviewed and copied the board minutes to examine the actual discussions and individual directors’ remarks. Its follow-up letters included views based on that review, but the full letters were kept confidential because the contents of the minutes could not be disclosed publicly.
Lee Chang-hwan, head of Align Partners, said, "Explaining to shareholders why the board rejected a major shareholder’s public proposal, whether it considered alternatives, and what it believes is the best course of action is a basic duty required of it as a fiduciary."
Meanwhile, investment banking industry observers generally interpret the focus of the dispute as having shifted from a JB-BNK merger to the standalone survival strategies of regional banks. Regional banks’ existing growth models are being put to the test as population declines and economic contraction in their regions coincide with the oligopoly of major commercial banks, the growth of internet banks, and the investment burden of transitioning to artificial intelligence (AI).
A senior investment banking industry official said, "The dispute has not ended simply because the demand for a merger was withdrawn." The official added, "The key question is whether the boards can show the market a standalone growth strategy and capital allocation plan that support their decision not to merge, rather than merely announce that conclusion." The official continued, "In the end, Align withdrew the 'JB-BNK merger' card, but left behind a more fundamental question."


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