ServBanc faces lawsuit over $0.80 per share merger price change

A class action lawsuit filed against ServBanc Holdco, Inc. alleges the company, as successor to IF Bancorp, Inc. (IROQ), issued a materially false and misleading proxy statement to shareholders, resulting in them approving a merger at a lower value than represented. The complaint, filed in the Northern District of Illinois, centers on the difference between a promised $27.20 per-share price and the approximately $26.40 shareholders actually received.

"Our practice centers on restoring investor capital and ensuring corporate accountability, which serves to uphold the essential integrity of the marketplace," Peretz Bronstein, Founding Partner of Bronstein, Gewirtz & Grossman, LLC, one of the firms that filed the suit, said in a statement.

The lawsuit claims the proxy materials overstated the merger consideration by failing to disclose that a required $13.99 million loan renewal would necessitate establishing a $7 million cash reserve. This reserve would cause IF Bancorp’s tangible common equity to fall below the $77.8 million threshold required to maintain the $27.20 per-share price, triggering a downward adjustment and eliminating the possibility of a special dividend for shareholders.

As a result of the alleged omissions, the complaint argues, shareholders were deprived of their right to cast a fully informed vote on the merger, which they approved on February 3, 2026. By approving the deal based on misleading information, investors not only received less valuable consideration but also forfeited their appraisal rights, which would have allowed them to have a court determine the fair value of their shares.

Proxy Promises vs. Financial Reality

The definitive proxy statement, filed on December 30, 2025, formed the basis for the shareholder vote. It outlined the approximately $27.20 per-share consideration and noted it was subject to an adjustment based on IF Bancorp's tangible common equity at closing. The statement also held out the possibility of a special dividend if the equity exceeded the $77.8 million threshold.

However, the lawsuit contends this was illusory. The complaint alleges that defendants knew, or should have known, that the renewal of a significant $13.99 million loan participation held by Iroquois Federal, IF Bancorp's subsidiary, was a prerequisite for the merger's completion. Furthermore, it alleges that ServBanc Holdco's approval for this renewal was conditioned on establishing a $7 million reserve against the loan. This reserve, announced on March 10, 2026—just two days before the merger closed—directly impacted the final equity calculation, reducing the cash merger consideration to $26.40 per share.

A Contingent and Uncertain Payment

In its March 10 announcement, IF Bancorp also revealed the creation of a $5,004,650 Contingent Payment Fund, which could potentially add about $1.51 per share. However, the disbursement of this fund was not guaranteed. According to the filing, payments from the fund to former IF Bancorp shareholders are dependent "only if the Loan is repaid."

The complaint highlights that there is "no guarantee as to the amount of the Contingent Payment Fund, if any, that may be paid," and any funds not distributed would revert to ServBanc Holdco. The lawsuit argues this contingent structure further misled shareholders, who had voted based on the prospect of a certain cash payment and a potential special dividend, not an uncertain future payment tied to the performance of a specific loan. The class action seeks to recover the damages for investors who held shares as of the February 3, 2026 vote, with a lead plaintiff deadline of June 29, 2026.

This article is for informational purposes only and does not constitute investment advice.