Board of Directors Continues its Refusal to Consider a Superior Offer from Blue Hill Advisors, Potentially Breaching their Fiduciary Duty
Territorial shareholders should not have to fight for the Board to declare a proposal with a 25% premium to be “reasonably likely to be superior” to the Hope transaction. The Board has expressed concerns about the Blue Hill offer. We urge the Board, acting as fiduciaries to shareholders, to deem the Blue Hill offer as “likely to lead to a superior offer” and immediately open negotiations with the consortium given it is in the best interest of all shareholders.
Below are key points addressing each of the arguments that the Board of Directors has made, as to why they refuse to open negotiations with Blue Hill.
- “Hope deal is ~25% premium to Territorial’s closing stock price just prior to merger announcement” “ The Blue Hill offer was a 25% premium to the Hope deal, how is that not a superior proposal?
- “A Blue Hill transaction would be taxable; the Hope Bancorp merger is not.” “ We find this argument disingenuous. Under current management the 5-year average on the TBNK stock is
$17.75 , leaving most shareholders with losses, not gains. In addition, since the stock price collapsed on 4/30/23, it has averaged$9.46 with a low of around$7 . Â Even if someone perfectly timed their trading, the excess premium from the Blue Hill deal would more than compensate for any taxes paid. - “1,000%+ increase to Territorial’s standalone dividend, increasing from
$0.01 per share to$0.11 per share” “ This new dividend is nearly 40% less than the dividend shareholders received prior to management’s slashing of the dividend in the 3rd quarter of 2023, just 8 months prior to the Hope deal.  The adjusted dividend is also less than a 4% yield.  Shareholders would be much better off taking the additional 25% in consideration and sticking it in a risk-free Treasury yielding over 4%. - “If Blue Hill is unable to complete a 100% tender, the remaining Territorial shareholders would be left with an illiquid, stub minority investment in a controlled company and with limited rights.” “ The Blue Hill Proposal clearly states they will tender for 100% of the shares.
- “Territorial shareholders will not immediately receive any payment for their shares while any transaction with Blue Hill is sitting in regulatory limbo.” “ This is customary for any transaction.  In fact, prior to the Blue Hill proposal, TBNK shares averaged a 4.75% discount to the implied price of the Hope deal.  A similar discount to the
$12.50 price would still equate to a price over$11.90 . - “No confidence that its proposed transaction is reasonably likely to close.” “ Without engaging with Blue Hill, how does the Board expect them to provide the necessary information to alleviate the stated concerns?  It is unreasonable to expect them to provide the necessary information in a public forum.
-  “In fact, the Blue Hill indication of interest presents so much risk and uncertainty, that if it were pursued, Territorial’s stock “ and the value of your investment “ could be worth substantially less than it does today.” “  As we cited several times, we believe the tender offer of
$12.50 could reasonably lead to a superior offer. Why not just announce that and open negotiations with Blue Hill to conduct proper due diligence? Worst case scenario is that Blue Hill can’t resolve the issues, and you proceed with the Hope deal. Per the DMA, Hope just can’t walk away if you open discussions with Blue Hill.
Why does the CEO & Chairman of the Board,
We believe management is breaching their fiduciary duty by not declaring the Blue Hill offer as “potentially likely to lead to a superior proposal”. As a potentially superior offer, the Board has an obligation to consider it. We reiterate our intention to vote against the Hope deal.
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i  Based off the TRA function on Bloomberg, including reinvested dividends from
