An Activist Is Circling Seacoast Banking: Good For Investors?

FBR’s Bob Ramsey upgraded Seacoast Banking Corporation of Florida SBCF from Market Perform to Outperform, while raising the price target from $16 to $20. The analyst cited Basswood Capital Management's significant increase in ownership as well as observer rights agreement as positives.

Basswood Increase In Stake

Basswood, which had owned some stake in Seacoast since late 2008, had sold 351,000 shares of the company in 2Q15. The investor had then purchased 1.2M shares in 3Q15 and 4Q15, taking the total stake to 6.9 percent and marking a record high ownership.

“We note that Basswood is at times an activist investor and at other times simply a long-term investor,” analyst Bob Ramsey wrote.

Observation Rights

Seacoast inked an observer rights agreement with Basswood on March 23, permitting Basswood to have increased access to Seacoast via board meetings, while preventing Basswood from soliciting a proxy statement, or making a presentation to shareholders or the board, that suggests Seacoast be sold.

M&A

“We think the high percentage of private equity/activist ownership bodes well for a potential takeout (and we note that many of SBCF's other investors are bank specialist funds that often "win" through sales)…Seacoast is located in attractive geographies with robust organic loan growth, low-cost deposits (12 bps), and scaling profitability; based on peer takeout multiples, we estimate that the company could be worth $18 to $25 in a sale,” Ramsey commented.