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Honolulu-based Territorial Bancorp postponed a meeting of stockholders, initially scheduled for Thursday, until Nov. 6, so the bank’s board and management could “continue discussions” with voting investors, the bank said in a statement Friday.
Territorial is mailing a letter to its shareholders urging them to vote to be acquired by Los Angeles-based Hope Bancorp – a $78.6 million deal that was announced in April – rather than be swayed by recent attempts by investor group Blue Hill Advisors to purchase the bank at a higher price, the company said Monday.
Territorial has rejected Blue Hill’s advances three times since the investor group and former Hawaii banking executive Allan Landon approached with a $12-per-share cash offer in August. Landon upped the offer to $12.50 per share in cash last week.
Blue Hill then issued a statement indicating that proxy adviser Institutional Shareholder Services recommended that Territorial shareholders vote against the Hope acquisition Oct. 10, on the grounds that the deal did not maximize shareholder value, while Blue Hill’s offer seems credible enough to justify the risks of rejecting Hope’s proposal.
Territorial shares rallied after Blue Hill’s boosted bid and are trading above Hope’s expectation, the statement noted.
“We urge you to consider the concrete and compelling opportunities that the Hope Bancorp merger will create and not be distracted and deceived by Blue Hill’s illusory, non-binding, highly conditional preliminary indication of interest,” Territorial CEO Allan S. Kitagawa said in the letter, to be mailed Monday.
The letter includes several points detailing why shareholders should vote for the Hope deal.
The merger is a tax-free stock-for-stock transaction under which Territorial’s shareholders will receive 0.8048 shares of Hope Bancorp common stock for each share of Territorial common stock they own, the company said.
Additionally, Hope’s dividend represents a more than 1,000% increase to Territorial’s, the Hawaii bank said. The lender also expects $10.5 million of incremental value from merger-enabled cost savings and synergies, it noted Monday.
The Hope deal would propel Territorial into a new class of banking institution, “with a broader footprint and diverse revenue streams, we will become part of a significantly more resilient business better able to navigate market environments to drive growth and shareholder value,” according to the letter.
The letter also highlighted the cons of going ahead with the Blue Hill offer, saying the advisor had not committed financing to purchase Territorial, required side agreements with undisclosed terms to be negotiated and signed by numerous unidentified investors, was subject to an undefined due diligence process and was dependent on overcoming regulatory hurdles that the advisor firm did not start yet and might find “challenging.”
Meanwhile, due diligence has already been completed for the Hope deal with few conditions that remain to be reviewed, the bank said earlier.
Blue Hill is unlikely to achieve the 70% tender threshold because of Territorial’s shareholder composition, according to advice from a proxy solicitation firm, as highlighted in the letter.
Further, if Territorial abandons the Hope merger and the Blue Hill transaction fails, it would weaken Territorial through significant stand-alone business risks, the bank said.
Moreover, for Blue Hill to reach its targeted 55% efficiency ratio, that may mean major layoffs and reduced investments in technology, Territorial said.
In the letter, Territorial reiterated its plan to complete the merger by the end of this year and requested shareholders to vote well before the Nov. 6 meeting.
“The Hope Bancorp merger will create a stronger, more diversified regional bank with an expanded footprint and diversified offerings to drive future growth … and it will enable Territorial to build on our more than 100-year legacy of supporting our local Hawai‘i communities,” Kitagawa said in the letter.
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