Several years ago Jim suggested there might be value in purchasing American Savings Bank if it was spun out or sold by Hawaiian Electric, which currently own all shares. Saw this article which piqued my interest. Plan to follow.
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Yeah, the separation of two businesses that have no reason to be together could be an opportunity. As outside shareholders, this separation would be more beneficial as a spinoff, but that doesn’t look like what they’re thinking about, though who knows? In any case, you get some kind of valuation on the bank in the article. So the positives for an outright sales are that the remaining utility gets full value on the bank, either in a straight sale or an IPO. The downside for shareholders is that you gotta trust them to use the cash smartly, or the market is going to discount much of the full value of that cash. And it looks like the company is facing various lawsuits pertaining to the 2023 fire, so it looks like plenty of that new cash may be spent on this kind of thing. And it may just be sabre-rattling as they did multiple times before to get the price up by saying “look at our other asset” etc.
So with an IPO we’d end up with a full-price bank (uninteresting) or a utility with perhaps dubious capital allocation (they’ve held the bank this long, for x) and a pile of cash, though it might be cheap looking only at the numbers and not the potential liabilities (say, raising $700 mn in cash on this $1.1 bn market cap, where 90% of the revenue is in the utility). Where this may be interesting is if somehow they do a spinoff and the bank comes off mispriced because utility investors don’t want to own a bank.
Jim
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As always Jim, thanks for your helpful analysis.