Cases & Investigations

McGee v. Fifth Third Bancorp Lawsuit

CASE NUMBER: 1:08-CV-539
CASE STATUS: Settled
COURT: United States District Court for the Southern District of Ohio
TICKER SYMBOL: NASDAQ: FITB

Berger Montague filed a class action in the U.S. District Court for the Southern District of Ohio on behalf of all former shareholders of First Charter Corp. (“First Charter”) who acquired the common stock of Fifth Third Bancorp. (“Fifth Third” or the “Company”) (NASDAQ: FITB) in connection with Fifth Third’s acquisition of First Charter on June 6, 2008, and/or who were shareholders of First Charter as of November 26, 2007 and were solicited to vote on this acquisition.

Former First Charter shareholders who acquired Fifth Third common stock in connection with Fifth Third’s acquisition of First Charter, and/or were solicited to vote on this acquisition may move the Court to appoint them as lead plaintiff, no later than August 19, 2008.  A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  Former First Charter shareholders who wish to discuss this action or the lead plaintiff selection process may contact Berger Montague toll free at 1-888-891-2289, or by e-mail at investorprotect@bm.net.

About the case

On August 16, 2007, First Charter announced that it signed a definitive agreement to be acquired by Fifth Third for $31.00 per share, which would be paid in the form of 70% Fifth Third common stock and 30% cash.  In connection with Fifth Third’s acquisition of First Charter, Fifth Third filed with the Securities and Exchange Commission a Registration Statement and Prospectus on Form S-4 on November 7, 2007, amended on November 29, 2007 (“Registration/Proxy Statement”).  The complaint alleges that Fifth Third and some of its senior officers and directors violated the federal securities laws by filing a Registration/Proxy Statement that was materially false and misleading.

The complaint alleges, among other things, that the Registration/Proxy Statement failed to disclose: (a) the Company’s increasing exposure to certain poorly performing real estate markets, including Florida, Ohio, and Michigan; (b) the Company’s growing exposure to late payments and defaults on mortgages and other non-performing loans; (c) the extent of the decline in the quality of the Company’s Tier 1 capital base; (d) the deteriorating credit trends and increasing expenses in the Company’s consumer loan portfolio; (e) the negative trends in the Company’s home equity and commercial construction loans; and (f) the deterioration in the credit quality of its loans.

The truth began to emerge on June 18, 2008, when Fifth Third announced that it was in need of capital and was planning a $1 billion convertible preferred stock offering, a sale of “non-core businesses” to raise an additional $1 billion in capital, and a 66% reduction of its quarterly dividend, from $0.44 per share to $0.15 per share.  On this news, the price of Fifth Third common stock declined 27% from its previous close of $12.73 per share, to close on June 18, 2008 at $9.26 per share on very heavy volume.

The June 18, 2008 announcement of the previously concealed material facts revealed that the market price of Fifth Third stock on the five trading days prior to the June 6, 2008 closing of the merger, upon which the exchange ratio of First Charter shares was based, did not reflect the true value of Fifth Third shares.  The true value of Fifth Third shares during the five day valuation period was materially less than the market value of Fifth Third shares because of the non-disclosure of these material facts.  As a result, First Charter shareholders did not receive Fifth Third shares worth $31.00, but instead received Fifth Third shares worth substantially less and should have received additional Fifth Third shares in order to receive the $31 value merger consideration that they agreed to, pursuant to the Prospectus/Proxy.

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Eric Lechtzin

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