The Treasury Department said it expects to make $5.4 million from the sale of warrants to purchase common stock of Valley National Bancorp in Wayne, N.J.
Treasury priced the 2.5 million warrants — which it received as part of the Troubled Asset Relief Program — for $2.20 per warrant at an auction Tuesday. The proceeds provide an additional return to taxpayers from Treasury's initial investment in the $14.4 billion-asset company, the department said in a press release Wednesday.
Each warrant represents the right to purchase one share of Valley common stock for an exercise price of $17.77. The warrants expire on Nov. 14, 2018. The sale is expected to close on May 24.
Jason O'Donnell, an analyst at Boenning & Scattergood Inc., said Valley had first dibs on the warrants, but apparently decided it wasn't in its best interest to buy at the price that Treasury was offering. He expects "fairly solid demand" for warrants from high-quality franchises such as Valley. "The gains that Treasury can make on the sale of these warrants can be fairly substantial," he said.