A small Minnesota thrift company’s plan to delist its stock and take itself private has suddenly left it fighting for its independence.
In late September, Wells Financial Corp. announced an offer to buy back 150,000 of its shares with a goal of reducing its number of shareholders to less than 300 and freeing it from Securities and Exchange Commission reporting requirements.
But that plan hit a roadblock when a hedge fund that only a month ago acquired a large chunk of Wells’ shares made an unsolicited offer to acquire the $232 million-asset parent of Wells Federal Bank for as much as $37.5 million. And though Wells’ board has twice rejected the offer from Opportunity Partners LP of Pleasantville, N.Y., the SEC has asked Wells to extend its buyback offer by two weeks to give shareholders more time to review the unsolicited offer, according to Wells’ chief financial officer, James Moll.
Hostile takeover attempts are rare in banking, and Opportunity’s bid to buy Wells (which is named for its hometown) is particularly unusual because the would-be buyer is not another bank. Phillip Goldstein, Opportunity’s general partner, said his group has invested in banks, but he acknowledged that it has no experience running them, and he declined to discuss its plans for Wells if it succeeds in acquiring it.
“Right now we’re just focusing on the offer,” Mr. Goldstein said in an interview Monday.
When it announced its stock buyback plan, Wells, which went public in 1995, said it was going private because it did not want to pay the costs associated with filing with the SEC. It offered to buy back up to 150,000 shares, or 13% of its outstanding stock, at $29.50 to $31.50 per share in a modified Dutch auction and said that it would conduct a reverse stock split after the auction was complete.
Through last Wednesday, 164,000 shares hade been tendered, which should have been enough for Wells to close its buyback program as planned on Friday. But in a news release Monday, Wells said that the deadline would be extended through Dec. 3 so that its board “can consider whether additional information relating to the offer should be disseminated to stockholders.”
According to Mr. Moll, Opportunity first made contact with Wells’ board by fax on Nov. 10 when it offered $33 apiece for all of Wells’ outstanding shares. In an SEC filing eight days later, Opportunity said it was upping its offer to $35 per share. Wells’ stock closed that day at a 52-week high of $34.25.
In an interview Monday, Mr. Moll said the board had never heard of Opportunity until late last month, when Opportunity acquired an 8.64% stake in his company. Though he reiterated that Wells intends to remain independent, he said the board may have considered an offer more seriously if it had come from a bank instead of a hedge fund.
“It would make it appear to be a more bona fide offer,” he said.
In a statement Friday, Opportunity said shareholders that accept the buyback offer would be getting a bad deal.
“We question whether the board is fulfilling its fiduciary duty to stockholders by cashing them out at an unfair price,” its statement said. “We are not tendering our shares and we strongly recommend that other stockholders not tender their shares.”
Mr. Goldstein added in an interview Monday that Opportunity is not giving up its quest to but the 70-year-old thrift. He said his group is considering taking its offer directly to shareholders and he did not rule out a proxy contest or even litigation.
Wells’ stock closed at $33.50 Monday.
