Hilltop Holding’s unsolicited $7 per share offer for SWS Group undervalues the company by at least $1 per share, one objector to the proposed transaction says.
Lone Star Value Management LLC owns 750,000 shares of SWS.
Since November 2013, Lone Star has been advocating for SWS to sell itself to the highest bidder, a letter signed by CEO Jeffrey Eberwein says.
SWS should at least be sold at its book value per share, which is currently $9.64 per share, the letter continues. But taking into accounts warrants held by Hilltop and Oak Hill Capital Management, the diluted book value of SWS is $8.30 per share, according to Lone Star’s calculations.
The Hilltop bid is only a 15% premium to SWS’ price prior to the bid becoming public. The typical premium is over 30% and is why there should be a bid of at least $8 per share, Eberwein continues.
Furthermore, Hilltop CEO Gerald J. Ford argued that there are synergies between his company and SWS. The $7 bid does not reflect those synergies, Lone Star says.
SWS rejected a $7.50 per share offer just days prior to the Hilltop and Oak Hill investments in July 2011, the letter points out.
A “fair and robust” shopping process will result in superior proposals for SWS. Hilltop should not stand in the way of that process and the SWS board needs to form a special committee that does not include its own management as well as representatives of Hilltop and Oak Hill, Lone Star says.
At the time of the offer SWS put out a statement calling for shareholders not to take action yet.
SWS is trading at $7.55 per share as of 12:30 p.m. Monday, up $0.26. Hilltop is at $24.77, down 0.63.
