Metro Bancorp Inc. won't say if it's for sale or not, but three of its largest investors are being very clear that they want it to be.
The $2.8-billion-asset bank holding company of Metro Bank is facing merger pressure from the three, all of whom recently said they want it to merge with a larger bank to increase the value of its publicly traded shares.
Two of the three are considered activist investors — investors that often push for whatever is necessary to increase stock value — while it's somewhat new territory for Dallas-based Clover Partners LP.
“I do whatever I can not to be an activist investor,” said Johnny Guerry, Clover's managing partner and portfolio manager. “But the best way to close the value gap is through an acquisition. We think the interest level would be pretty meaningful.”
Metro Chairman, President and CEO Gary L. Nalbandian said in a statement that the Swatara Township-based Metro does not make public comments about discussions with shareholders. Bank officials did not comment on any sale status.
Matthew Breese, vice president and senior analyst of Northeast banks for brokerage firm Sterne Agee, said the regional market is very competitive and has low growth capacity. That makes mergers and acquisitions one of the easiest ways for a company to grow — and make profits for shareholders.
“Someone would (buy Metro) at the right price,” Breese said. “It's a really tough market out there right now. The banks are beating their heads together to get the next loan.”
In May, PL Capital LLC announced it increased its ownership stake in Metro to 8.2 percent from 6.8 percent — and now 8.4 percent — and said it will “monitor” the company's management and board of directors for performance.
In a June 20 filing with the Securities and Exchange Commission, Principal Richard J. Lashley wrote to Nalbandian and recommended the bank be sold or merged with a bigger bank, citing the low-growth market and the potential value of the franchise.
In early June, Basswood Capital Management LLC minimally cut its ownership stake in the bank to 9.9 percent. In its SEC filing, Basswood Managing Member Matthew Lindenbaum wrote in a letter to Metro's board of directors that a merger would fetch a “significant premium” above the bank's current stock value.
Lindenbaum and other Basswood associates did not respond to requests for comment. PL Capital principals Lashley, based in Morristown, N.J., and John Palmer, based in the Chicago area, also did not return calls seeking comment.
Both PL Capital and Basswood are known as activist shareholders, and both have made waves elsewhere recently.
In a lawsuit filed June 13, Banc of California Inc. sued Basswood over what it believes was a double-cross by the New York City hedge fund. The bank and the firm were in private investment talks, according to the suit, but the talks broke down. Basswood then used information divulged by the firm to buy Banc of California stock on the open market, the suit claims. The two parties had a confidentiality agreement, according to the suit, which included the barring of Basswood buying any Banc stock for one year.
“The ink was hardly dry on the parties' contract when Basswood's affiliates — while Basswood was in possession of (the bank's) material nonpublic information — began to surreptitiously accumulate a substantial stake in (the bank) through open-market purchases that went unreported for months,” according to the suit.
PL Capital touts itself as interested in “long term consolidation of the banking industry,” according to its website.
Earlier this year PL Capital managed to get one of its representatives on the board of directors at Alliance Bancorp Inc. in Broomall. It is one of Alliance's largest shareholders. According to PL Capital officials, it had requested a seat on the board previously, but Alliance's board refused. PL Capital threatened a proxy battle, but Alliance appointed the representative to the board in February.
Looking into the future
Guerry said Clover went through a proxy battle recently but did not specify the bank. Records show Guerry made a failed play for a board of directors' seat at Hampden Bancorp Inc. in Massachusetts.
Clover, which Guerry said has $150 million in assets and invests in small and mid-cap banks, bought into Metro in 2012, when the Federal Deposit Insurance Corp. still had the bank under consent orders. He pegged a possible selling price for Metro of between $29 and $30 per share, a more than 20 percent markup on its current trading price of around $23. The company owns 2.13 percent of Metro's outstanding common shares.
Guerry said he doesn't plan on engaging in a proxy battle, but he said it's a long time until the annual shareholders meeting in spring 2015.
“Hopefully management will not continue to ignore its shareholders,” Guerry said. “We wanted to make our position public so it's more on the record.”
Not all of Metro’s largest shareholders are going public with their intentions.
Wellington Management Company LLP of Boston has a 9.69 percent stake in Metro, according to the bank’s latest proxy statement. Company officials would not comment on its intentions for Metro and said it would not make any intentions public in the future.
Officials from New York City-based BlackRock Inc., a subsidiary of PNC Financial Services Inc., also would not comment. BlackRock owns a 6.73 percent stake in Metro, according to the proxy report.