DEFA14A: Territorial Bancorp Urges Shareholders to Approve Hope Bancorp Merger, Citing Concerns Over Blue Hill's Proposal

Territorial Bancorp is urging its shareholders to vote in favor of the proposed merger with Hope Bancorp, raising concerns about the credibility and feasibility of an alternative proposal from Blue Hill Advisors.

Summary

• Territorial Bancorp is urging shareholders to vote for the proposed merger with Hope Bancorp at the upcoming Special Meeting on November 6, 2024.
• The company expresses concerns about a preliminary indication of interest from Blue Hill Advisors, stating they have not provided sufficient evidence of committed financing or the ability to secure regulatory approvals.
• Territorial believes the Hope Bancorp merger offers tangible value, a clear path to close, and creates a stronger combined entity.
• The company highlights risks associated with terminating the Hope Bancorp merger, including potential decline in share value, tax implications, and delays in receiving payment for shares if pursuing a transaction with Blue Hill.
• The Hope Bancorp merger is presented as a 100% tax-free, stock-for-stock transaction with a ~25% premium to Territorial's closing stock price 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).
• Territorial emphasizes the benefits of the merger for customers, employees, and local Hawaii communities, with continued operation under the Territorial name and local leadership.
• The Territorial Board recommends shareholders vote FOR the Hope Bancorp merger, citing the illusory and non-binding nature of Blue Hill's proposal.

Sentiment

Score: 6

Explanation: The document expresses a cautiously optimistic sentiment towards the proposed Hope Bancorp merger, while simultaneously highlighting concerns and risks associated with an alternative proposal from Blue Hill Advisors. The overall tone is persuasive, aiming to convince shareholders to vote in favor of the merger.

Positives

• The Hope Bancorp merger offers a ~25% premium to Territorial's closing stock price prior to the merger announcement.
• Shareholders could see a 1,000%+ increase to Territorial's standalone dividend (from $0.01 to $0.11 per share) through the Hope Bancorp merger.
• The Hope Bancorp merger is a 100% tax-free, stock-for-stock transaction.
• The merger is expected to create $10.5M of incremental value from annual merger enabled cost savings and synergies.
• The merger will create significant benefits for customers, employees and local Hawaii communities.

Negatives

• Territorial has been operating at a loss over multiple quarters.
• Loan growth is flat.
• Revenues are declining.
• The Board decided to cut Territorials dividend to essentially $0 prior to the Hope Bancorp merger agreement.
• A Blue Hill transaction would be taxable.

Risks

• Failure to approve the Hope Bancorp merger could have significant negative consequences for the value of shareholder investment.
• There are concerns about Blue Hill's ability to secure regulatory approvals and complete a transaction.
• 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.
• Delays in a Blue Hill transaction could diminish the net value of their preliminary indication of interest.
• The closing of the proposed transaction is subject to regulatory approvals, the approval of Territorial Bancorp stockholders, and other customary closing conditions.

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 combined entity anticipates unlocking new value creation opportunities for shareholders while building on Territorial's legacy in Hawaii.

Management Comments

• Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer: '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.'
• Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer: 'In contrast, 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 seeking to merge with Hope Bancorp to create a stronger, more diversified regional bank. This move is contrasted with a potential acquisition by Blue Hill Advisors, which is portrayed as less certain and potentially detrimental to shareholders.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards beyond mentioning Hope Bancorp's total shareholder returns (TSR) outperforming peers.
• It focuses on the specific benefits of the Hope Bancorp merger for Territorial shareholders, employees, and customers in the Hawaiian market.

Stakeholder Impact

• Shareholders are expected to benefit from a ~25% premium and a significant dividend increase if the Hope Bancorp merger is approved.
• Customers will benefit from additional choices and continued service from the same people they know and respect.
• Employees will continue to receive competitive compensation and benefits and will have additional career opportunities.
• Local Hawaii communities will continue to be supported and invested in by the combined organization.

Next Steps

• Territorial shareholders are urged to vote FOR the Hope Bancorp merger by internet, phone, or mail before the Special Meeting on November 6, 2024.
• The company aims to complete the Hope Bancorp transaction by the end of this year, subject to shareholder approval and other customary closing conditions.

Key Dates

Keywords

merger, Hope Bancorp, Territorial Bancorp, Blue Hill Advisors, shareholders, proxy, acquisition