Lawrence B. Seidman has a well-documented history of shareholder activism, so when he disclosed that his investment group had bought a 5% stake in Interchange Financial Services Corp. of Saddle Brook, N.J., analysts and investors began buzzing that Interchange might soon be in play.
But Interchange chief executive Anthony Abbate insisted the $1.5 billion-asset company is not for sale, and took a shot at his newest major owner.
"Mr. Seidman has a record of talking about shareholder value, but no record of actually creating it," the CEO said in a statement issued Friday, two days after Mr. Seidman revealed in a Securities and Exchange Commission filing that his group had acquired nearly a million shares of Interchange.
"Everyone in this business knows Mr. Seidman's objective is the forced sale of existing companies, not the creation of value over the long term," Mr. Abbate said in the statement.
Mr. Seidman said in an interview this week that all he wants to do is start a "conversation" with Mr. Abbate about the best way to "maximize shareholder value."
But it is hard to ignore Mr. Seidman's track record. In his April 13 SEC filing he listed 20 banking companies his group has invested in since 1998. Of those, 14 were eventually sold.
That could explain why Interchange's trading volume has been roughly twice its average in recent days; message-board chatter has focused on who might buy Interchange and how much it might fetch. Its shares jumped 5.4%, to $18.38, in the first four trading days after the disclosure of Mr. Seidman's investment.
William McCrystal, who covers Interchange for McConnell, Budd & Romano Inc. in Morristown, N.J., said Mr. Seidman's move surprised him. The analyst acknowledged that Interchange had an "off year" in 2004 but said it is still much stronger than Mr. Seidman's usual targets.
"He typically goes after companies with a good franchise but management that hasn't lived up to its promise," Mr. McCrystal said. "Interchange's performance has been good. It's certainly not an underperformer."
It was probably location that attracted Mr. Seidman, Mr. McCrystal said. Interchange has 29 branches in Bergen, one of the wealthiest counties in the country. In mid-2004 it was sixth in deposit share in Bergen, at 3.73%, according to statistics compiled by the Federal Deposit Insurance Corp.
"Because of the value of its franchise, there's no question Interchange would get an enormous amount of attention" from potential acquirers, Mr. McCrystal said. "There'd be no lack of suitors."
He mentioned the $60 billion-asset North Fork Bancorp Inc. of Melville, N.Y., as one possibility. Others include the $10.8 billion-asset Valley National Bancorp of Wayne, N.J., and the $21.1 billion-asset Hudson City Bancorp Inc. of Paramus, N.J. Hudson City is converting from a mutual holding company to full stock ownership and expects to net more than $3.5 billion from the conversion.
Interchange reported that its net income rose 11.3% last year, to $18.2 million. Earnings per share, however, rose just 3.2%, to 95 cents. EPS rose 4.5% in 2003, but before that Interchange had several years of double-digit EPS growth.
In interviews Monday and Tuesday, Mr. Seidman said he had "no problem" with Interchange's earnings through 2002, but he said the last two years have been lackluster.
"The real question is, What is best for the shareholders?" he said. "I'm trying to start an intelligent conversation."
One thing Mr. Seidman wants discussed is whether Interchange, which has been in business for 35 years, would be better off selling itself. In the SEC filing he said he wanted to conduct "a comprehensive review and analysis of the value that could be achieved as an independent institution versus its value from a sale to a larger institution or a converting mutual institution."
Mr. Abbate seems to want no part of any such conversation. He said in an e-mail sent to American Banker on Tuesday that the course Mr. Seidman proposes "is simply the opposite of this bank's strategic plan."
Interchange's results for the past 10 years, including a 616% return to investors, are "the envy of Wall Street," Mr. Abbate wrote. "When you have achieved such exceptional results in the marketplace, it makes it a little tougher for an outsider to grab 5% and say, 'We need to disrupt this plan and sell in order to maximize value.' "
Mr. Seidman said he has spoken with Mr. Abbate once. "He's been very cordial and I'm looking forward to additional conversations," he said.
Mr. Seidman recently bought a 7% stake in another New Jersey community bank, Yardville National Bancorp in Hamilton.
In February he signed a one-year contract to advise Yardville on planning, acquisition, and growth opportunities, promising to vote his shares with management for the contract's duration.
Yardville CEO Patrick M. Ryan said of Mr. Seidman at the time, "I've reached out to him to see if we could work together to take Yardville to the next level."
