EBC buying HONE for cash and stock, $12

Investment Analysis Clubs Jim Royal
1

Jim, not sure if this was on your mutuals list but I owned a bit of HONE and I just noticed a couple weeks ago that there is an agreed buyout from Eastern Bancorp (EBC) for $12 cash or stock. Not sure what the exchange rate is but when the price went over $12, I took the money and am now out.

Any news or interest here. Thinking of adding to my EBC position since it seems like they are buying at below book value. Seems like a winner.

Randy
Long EBC and no longer a position in HONE.

2

Hey, Randy,

I owned HONE last year and when it hit $13 or so, I sold out. The current market cap is $521 mn, according to Yahoo, while I get TBV at around $516 mn. So it’s trading around 1.01x TBV. But it’s being traded mostly for EBC stock (and some cash), which some may think is reasonably priced at (my estimate of) 1.21x TBV.

I generally look at the thrifts trading at a discount to TBV.

Jim

3

Are there any such thrifts?

4

Yes, when thrifts come public they typically trade at a significant discount to TBV. Even years later they may dip into discount territory even when they’re poised to be acquired (i.e. near or after the three-year mark on the IPO). They look ugly, though – low RoE, poor deposit book, etc.

Jim