BMO Harris Bank, one of the nation's 20 largest banks, made a non-binding bid for Bremer Financial, Minnesota's fourth-largest bank, in August 2019, exacerbating a split between Bremer's executives and trustees of the charity that owns it, evidence presented in a legal hearing shows.
The trustees later that month met with top executives of two other banks they invited to look at Bremer Financial — Old National Bank and Huntington Bancshares — but it was then clear to them they would be battling Bremer's executives to make a deal, according to more evidence.
Bank executives and trustees pledged before the hearing began last week not to openly discuss the names of the companies that expressed an interest in Bremer Financial in 2019. But documents offered as exhibits during a trial have made some of the identities clear.
Still not publicly known is the name of the firm that first expressed interest in a "merger of equals" with Bremer Financial early in 2019. That firm has been referred to in court proceedings as "Company A." Its offer triggered the split between Bremer Financial and the Otto Bremer Trust, which owns the bank, over the bank company's future.
Company A, evidence has shown, placed a valuation of $1.8 billion on Bremer Financial when it reached out in spring 2019. And BMO Harris later reached a similar valuation. With those higher valuations in hand, trustees argued to Bremer Financial that a sale might be needed to meet its IRS obligations for distributing assets.
Their split with the bank's board spilled into the open in October 2019 and they sold some shares to hedge funds in hopes of taking control of the board. The bank then sued the trust and last year the Minnesota Attorney General's office, which reviews the operations of large charities, joined the legal battle.
The state is asking Ramsey County District Judge Robert Awsumb to remove the trustees, citing other alleged mismanagement at the trust, which has more than $1 billion in assets and is one of the largest in Minnesota.
In minutes of a Bremer Financial board meeting in 2019, Jeanne Crain, the chief executive of Bremer Financial described the bank that had approached the trust's investment advisor as "one of the largest banks in the Canadian marketplace, and entered the Twin Cities market through its acquisition of M&I." The name of the bank was blacked out from the document.
BMO acquired Marshall & Ilsley Corp., a Milwaukee-based company also known as M&I Bank, in 2010. BMO Harris is the Canadian bank's U.S. subsidiary.
BMO Harris did not respond to a request for comment.
It ended up withdrawing its non-binding offer. Trustees' attorney Mike Ciresi suggested in his opening statement, without referring to the bank by name, that it came back at the end of that year and said it would renew discussions.
The trust has owned the bank since the death of founder Otto Bremer, who had no descendants, in the early 1950s. It is the only bank-charity relationship of its kind in the U.S.
Columbus-based Huntington, which ended up gaining a sizable presence in Minnesota this year with its purchase of TCF Financial, was hesitant about pursuing a deal with the Bremer Trust because of concerns whether it would be supported by the Bremer Financial board.
In a message to the trust's investment advisor that was offered as an exhibit in court, trustee Brian Lipschultz wrote that "Steve" from Huntington — an apparent reference to Steve Steinour, Huntington's CEO — asked a lot of questions about that topic.
"And then he said, 'We won't do a hostile deal,'" Lipschultz wrote in the note. "So I did some wax-on, wax-off but it was fairly uncomfortable. I don't blame him for being honest if that's his bright line but it certainly left Dan [another trustee] and me with the impression that if we told him what is really going on, they would be out so fast there wouldn't be another convo."
Lipschultz also suggested his own reservations about doing a deal with Huntington.
The Huntington executive "spent way too much time serenading us with all of the good that Huntington does for communities," he wrote. "To me, that's kind of distracting. We're here to talk shop ... as in the money kind. We'll take care of doing good. And a lot of it. We want a hard charging partner focused on making money. Not a tree hugger."
A Huntington representative said the bank had no comment since the issue was part of ongoing litigation.
In the same message, Lipschultz also made clear the trustees had also met with the CEO of "ONB" — a reference to Indiana-based Old National Bank. He said he was impressed by that CEO and his strategy of combining community banks.
"Trouble of course is that it's hard to see how they could come up with the coin to do our deal," he wrote.
Old National did not respond to a request for comment.