Territorial Bancorp in Hawaii is postponing its shareholders' vote on an acquisition offer amid ongoing efforts by another potential buyer to scuttle the $78 million deal.
The Honolulu-based bank said Friday that a shareholder meeting where the vote will occur — originally scheduled for Oct. 10 — has been pushed back to Nov. 6. Territorial's board is continuing to recommend that shareholders vote to approve the proposed acquisition by Los Angeles-based Hope Bancorp.
The vote is being postponed "in order to allow the Territorial Board of Directors and management team to continue discussions with stockholders regarding the pending Hope Bancorp merger," the $2.2 billion-asset bank said in a press release.
Territorial did not say whether it will engage in talks with
Territorial has previously rejected
The meeting's postponement came four days after the proxy advisory firm Institutional Shareholder Services, known as ISS, recommended that Territorial shareholders vote against the Hope offer. ISS argued that the pending deal does appear to maximize shareholder value.
"Despite some uncertainty, the competing offer from Blue Hill appears sufficiently credible to mitigate the downside risk of rejecting the proposed merger," ISS wrote in a Sept. 30 report. Shares in Territorial are currently trading above the implied merger consideration, ISS noted.
Territorial's stock price rose another 6.2% in late-afternoon trading Friday to $11.30, up from around $7.50 when the Hope deal was announced last spring, though bank stocks are up overall this year.
The Blue Hill-led group has said that it is offering $12.50 per share. Meanwhile, Hope has said that its offer priced Territorial at $8.82 per share, though the actual value would be determined when the transaction closes.
Former Bank of Hawaii CEO Allan Landon is part of the Blue Hill-led group that made the competing offer. He said Tuesday in a written statement: "We remain committed to our superior proposal, which is better for shareholders, employees, customers and the Hawaiian market."
Territorial, which operates around 30 branches across the Hawaiian Islands, was hurt over the last couple of years by rising interest rates. Its assets largely consist of fixed-rate mortgages and mortgage securities, according to ISS, that lost value when rates soared.
Territorial's net interest margin fell from 2.72% in the second quarter of 2022 to 1.56% in the same period this year. The bank reported a net loss of $775,000 in the quarter that ended on June 30, 2024.
Hope, which specializes in serving Korean Americans, struck its deal to acquire Territorial back in April. The buyer's CEO, Kevin Kim, said at the time that the acquisition would create the "largest U.S. regional bank catering to multi-ethnic customers across the continental United States and the Hawaiian Islands."
But ISS was critical of the deal's timing. The advisory firm wrote this week that the transaction was announced near the all-time low in the seller's stock price, and a few months before the Federal Reserve cut interest rates, raising concerns that Territorial's board of directors did not negotiate the deal from a position of strength.
"By the time the board started to engage with interested parties," ISS also wrote, "the bank was barely covering operating expenses, and by the time it signed the deal, it was already loss making."
Territorial has said that the unsolicited offer from the Blue Hill-led group has various problems. For example, if the prospective investors are unable to tender at least 70% of Territorial's stock, the deal would evaporate, leaving Territorial empty-handed, the Hawaiian bank has said.
In addition, Territorial would have to pay Hope a $3 million termination fee to pursue the competing offer, according to the bank.
""The unsolicited letter from Blue Hill claims to provide a nominally higher purchase price, but there are significant factors making the proposal highly uncertain and inferior to the merger agreed upon with Hope," Territorial Chairman, CEO and President Allan Kitawaga said in a Sept. 19 press release.
