Let's see....if they do a capital raise of 100m at 8% with warrants to buy 17 million shares at 5.75 Hilltop and Oak Hill stand to make approximately 25 million or 25% on their investment the first year (based on current pricing). That investment will most definitely go up as the economy continues to improve and SWS's share price continues to go up. With banks barely making a few percentage points on their investments, I would say these two companies would have to admit they have found a real sucker.
Another option would be to say look: this is a bad deal for our existing shareholders. We do not think we have enough capital in case of a further downturn. Let's look at selling the company. We know there is a 7.50 offer on the table. We also know that Sterne is chomping at the bit, knowing a combined company would do extremely well as the economy improves. The question is how high of a price would they would be willing to go. Let's at least sit down and hear them out. Also, is there anyone else out there willing to buy in near the bottom.
Next option is to do nothing or continue to look for a better financing deal. SWS is looking to add 100 million to an asset base of 4.4 billion or approximately 2%. Do you really want to dilute existing shareholder base by 17% to add 2% to capital. I don't think this current management is looking at anything but saving their existing positions. Why else would they not even be interested in exploring strategic options by at least meeting with Sterne? The economy is improving and this government knows that the key to an ecomic recovery is an improving real estate market. They will keep interest rates below normal levels until the real estate market crisis has passed. That bodes well for SWS.
This management's stock holdings interest in SWS is worth a hill of beans. It is completely irrelevant. It is also clear they do not have existing shareholders best interest in mind. Please vote against their assinine proposal.
Doing nothing is not an option for them because they have consent order requiring them to add capital to the bank. I sold some yesterday and the balance as soon as I heard that Sterne Agee bought another bank. SWS may still do well especially if Bass takes an active role in directing business to it. It could easily be at $7.50 or more by year end but it is not going there anytime soon now that Sterne is probably out of the picture.
WW....you're right. The two funds will obtain 34% ownership by putting up 5.75 a share and have 5 years to decide if it's in their best interest. As stated earlier that 100 million amounts to 2% of current assent value. That deal in itself seems ludicrous. I find it amazing in this world awash with cash, they couldn't find someone to invest at a more reasonable rate.
If this management and board had existing stakeholders interest in mind, you can bet they would have been willing to at least meet with Sterne to see if one, Sterne was capable of obtaining financing and two, they could obtain a more favorable price in consideration of current book value of 11/sh. After all, what have they got to lose other than their jobs.
Is it possible that SWS met with Sterne and hammered out a deal? Note that Sterne did not name the bank holding company.
You're saying the dilution is 17%. Isn't it 34%, being 17% to each of two entities. That's the way I read it. SWS is obviously indicating that the BOD has no real options and they are accepting what appears to be a survival that will keep the insiders in the best position. Were there any fees (consolations) not disclosed paid to the officers? I wonder. WW