Popular in San Juan, Puerto Rico, is facing pressure from an activist investor to consider selling itself.
Raging Capital Management said in a letter to the $52 billion-asset company’s board that the company should also look at ways to return more capital to shareholders and sell some of its holdings. The letter was made public late Monday.
The investor, which owns less than 1% of Popular’s stock, said it wants the board to authorize a two-year, $1 billion share buyback plan and double the dividend payout ratio. The letter also called for the possible spinoff of Popular’s 16% stake in the payments processor Evertec.
Raging Capital claimed in the letter that Popular is undervalued and overcapitalized.
The company’s 18% dividend payout ratio is roughly half that of similar-sized mainland banks, according to Piper Jaffray. It also has higher capital ratios than banks in its peer group, according to Piper Jaffray.
“Implementing our proposed buyback program and enhancing the dividend payout ratio would be a good first step to confirm that you are serious about unlocking shareholder value,” William Martin, Raging Capital’s chairman and chief investment officer, said in the letter.
Martin claimed in the letter that Popular, which currently trades at about $52 a share, could be worth $90 a share if it were “more appropriately capitalized.” He argued that the valuation could be higher if the company were sold.
“The time is now for the board to be more aggressive,” Martin added.
Popular said in a statement Tuesday that it would review the letter.
The company “always seeks to maintain an open and constructive dialogue with its shareholders,” the statement added.
