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. Hilltop already owns or controls 24% of the shares of SWS through actual stock holdings or warrants.
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.