DEFA14A: Territorial Bancorp Urges Shareholders to Approve Hope Bancorp Merger Amidst Unsubstantiated Blue Hill Interest

Territorial Bancorp is urging its shareholders to vote in favor of the proposed merger with Hope Bancorp, cautioning against an alternative indication of interest from Blue Hill Advisors due to concerns about its credibility and ability to close a deal.

Summary

• Territorial Bancorp is holding a Special Meeting of Stockholders on November 6, 2024, to vote on the pending merger with Hope Bancorp.
• The Board of Directors strongly recommends shareholders vote FOR the Hope Bancorp merger.
• The board believes that failure to approve the merger could have significant negative consequences for the value of shareholders' investments and Territorial's continued success.
• The board has concerns about an indication of interest from Blue Hill Advisors, stating they have provided no evidence they can actually pay for the company.
• The board also questions Blue Hill's M&A and regulatory experience, as well as their ability to obtain required regulatory approvals.
• The board believes that a Blue Hill transaction would be taxable, while the Hope Bancorp merger is not.
• The Hope Bancorp merger is described as a 100% tax-free, stock-for-stock transaction, offering 0.8048 shares of Hope Bancorp for each Territorial share.
• This represents an approximate 25% premium to Territorial's closing stock price just prior to the merger announcement.
• The merger is expected to result in a 1,000%+ increase to Territorial's standalone dividend, from $0.01 to $0.11 per share.
• The merger is expected to unlock $10.5 million of incremental value from annual cost savings and synergies.
• The board aims to complete the Hope Bancorp transaction by the end of the year, subject to shareholder approval.

Sentiment

Score: 7

Explanation: The document expresses a positive outlook regarding the Hope Bancorp merger, emphasizing the potential benefits for shareholders, customers, and employees. However, it also acknowledges the challenges faced by Territorial Bancorp as a standalone entity and expresses concerns about an alternative proposal from Blue Hill Advisors, which tempers the overall sentiment.

Positives

• The Hope Bancorp merger offers a 25% premium to Territorial's stock price before the announcement.
• The merger is projected to increase the dividend from $0.01 to $0.11 per share, a 1,000%+ increase.
• The company anticipates $10.5 million in annual cost savings and synergies from the merger.
• The Hope Bancorp merger is structured as a tax-free, stock-for-stock transaction.

Negatives

• Territorial has been operating at a loss over multiple quarters.
• Loan growth is flat, and revenues are declining.
• The board cut Territorial's dividend to essentially $0 prior to the merger agreement.
• The company faces substantial business and regulatory risks as a standalone, monoline bank.

Risks

• Failure to approve the Hope Bancorp merger could negatively impact the value of shareholders' investments.
• There are concerns about Blue Hill Advisors' ability to finance and complete an alternative transaction.
• A Blue Hill transaction would be taxable, potentially leaving shareholders with less value.
• If Blue Hill is unable to complete a 100% tender offer, remaining shareholders would be left with an illiquid, stub minority investment.
• Delays in a Blue Hill transaction could diminish the net value of their proposal.
• The closing of the Hope Bancorp merger is subject to regulatory approvals and other customary closing conditions.
• Difficulties in integrating Hope Bancorp and Territorial Bancorp could hinder the achievement of anticipated synergies and cost savings.
• Higher than anticipated transaction costs, deposit attrition, and customer loss could negatively impact the merger's success.
• Required governmental approvals of the merger may not be obtained on its proposed terms and schedule.

Future Outlook

Territorial Bancorp aims to complete the Hope Bancorp transaction by the end of the year, subject to shareholder approval and other customary closing conditions. The merger is expected to create significant benefits for customers, employees, and local Hawaii communities.

Management Comments

• The Territorial Board of Directors strongly recommends that all Territorial shareholders vote FOR the Hope Bancorp merger and related proposals TODAY.
• The Territorial Board takes its fiduciary responsibilities seriously.
• Absent more information from Blue Hill, there is no basis to engage with Blue Hill or reach a determination that their illusory, non-binding, highly conditional preliminary indication of interest is superior, likely to lead to a superior proposal, or is in Territorial shareholders best interests.
• With Hope Bancorp, we will become part of a larger, more diversified regional bank, unlocking new value creation opportunities for shareholders while building on our more than 100-year legacy of serving and supporting our local Hawaii communities.

Industry Context

The document highlights the trend of consolidation in the banking industry, with Territorial Bancorp seeking to merge with Hope Bancorp to create a larger, more diversified regional bank. This move is presented as a way to address the challenges faced by smaller, monoline banks in a changing market environment.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards in terms of financial performance or merger terms.
• However, it emphasizes the potential for increased shareholder value and operational efficiencies through the merger, which are common goals in bank consolidation transactions.
• The document implicitly positions the Hope Bancorp merger as a more reliable and value-creating option compared to the uncertain and potentially risky alternative proposed by Blue Hill Advisors.

Stakeholder Impact

• Shareholders are expected to benefit from a premium on their stock and a significant increase in dividends.
• Customers are expected to benefit from additional choices and continued service from familiar faces.
• Employees are expected to continue receiving competitive compensation and benefits and will have additional career opportunities.
• Local Hawaii communities are expected to continue receiving support and investment from the combined organization.

Next Steps

• Shareholders are urged to vote FOR the Hope Bancorp merger by internet, phone, or mail.
• The Special Meeting of Stockholders will be held on November 6, 2024, to vote on the merger.

Key Dates

Keywords

merger, Hope Bancorp, Territorial Bancorp, Blue Hill Advisors, shareholders, proxy, transaction, regulatory approvals, dividend, stock