Under the terms of the Merger Agreement, Prudential shareholders will receive Fulton common stock based on a fixed exchange ratio of 0.7974 Fulton shares and $3.65 in cash for each Prudential share they own. The implied value of the transaction, based on the 10-day volume weighted average stock price of $18.01 for Fulton’s common stock for the period ending March 1, 2022, is approximately $142.1 million in the aggregate, or $18.01 per Prudential common share. The transaction is expected to qualify as a tax-free exchange with respect to the stock consideration received by Prudential shareholders. In aggregate, approximately eighty percent (80%) of the transaction consideration to Prudential common shareholders will consist of Fulton common stock, with the remaining twenty percent (20%) payable in cash.
I too picked up some shares after reading your article back in August. Now wondering about whether to sell now and leave an approximately another buck per share on the table or take the bird in hand and sell shares now after today’s pop. PBIP goes ex dividend on 3/7 although the quarterly is only .07 per share.
Now that I’ve posted, I’ll have to wait to sell until the 7th anyway but wonder about your opinion and opinion of others as to whether to sell now or wait for about another 5.85% in gain after the deal goes through. Haven’t read anything about Fulton so no idea as to whether or not I would want to hold onto those shares.
Taxes. If we can get the holding period to over a year, long-term rates kick in. They expect to close the transaction in Q3. So that’s as early as July to as late as September. Given that I wrote the article in late August, it may be a moot point for you all, depending on the exact closing date. (Of course, tax-advantaged accounts make this a moot point, too.)
The deal is structured as a partial stock swap, so the stock portion of the deal is tax-deferred regardless. The cash portion will be taxable immediately.
Dividends. I haven’t seen anything about dividends being canceled (but I haven’t read through the merger documents yet), and we expect at least the next one to be paid in a few weeks. If that continues to be the case, we’ll able to eke out at least one additional dividend in late June and maybe maybe one in September, though that’s quite iffy. On the purchase price, that’s less than one percent.
Price. While the reference price for conisderation is $18.01, PBIP finished today at $17.11. But it’s important to note that the stock swap means the final price will shift around depending on FULT’s performance. FULT was up on the news, a good sign. FULT’s five-year stock performance has been nothing to write home about – basically flat. RoE in 2021 was 10.6%, NPAs were 0.6%, RoA was 1.05%, efficiency ratio at 63%. High ratio of core deposits. I calculate FULT’s P/TBV at 144%. It trades at just less than 11x last year’s earnings. It doesn’t look especially expensive.
So are you comfortable owning FULT at that price, given that performance in a rising rate environment? I’ve only looked quickly, but the bank looks reasonably run and they’re going to get some nice cost savings from PBIP, but the latter bank is just 4-5% the size of the acquirer, so it’s not exactly transformational for FULT. In the end I think I can find things that are more attractive and potentially lower risk than FULT.
I’m running the short/long on FULT/PBIP to harvest the $3.65. But, it would take a lot of luck during the day to get anything there, now.
Very clever. 20/20 hindsight, I should have done that.
My current thinking is that I’ll just close out the position today or tomorrow. I haven’t really looked into FULT, but it certainly doesn’t fit into my general thrift thesis. Will use the funds for another thrift, another day.
Matt, I still own all my shares of PBIP. I’ll continue owning FULT after the merger. The $3.65 cash consideration goes into other things, potentially thrifts.
