Hilltop Holdings Announces Modified Dutch Auction Tender Offer

Zacks Equity Research
·4-min read

Shares of Hilltop Holdings Inc. HTH gained 12.5% yesterday, following the company’s commencement of a modified “Dutch auction” tender offer. It announced that it commenced a tender offer to purchase up to $350 million of its common stock in cash.

It will purchase shares at a price not less than $18.25 per share and not greater than $21, less any applicable withholding taxes and without interest.

Unless extended or terminated, the tender offer will likely expire on the midnight of Oct 30, 2020.

Notably, in a modified “Dutch auction” tender offer, shareholders are allowed to indicate how many shares and at what price within the range described above do they wish to tender their shares. And, based on the number of shares tendered and the prices quoted by the tendering shareholder, the company decides the lowest per-share price that will enable it to acquire the required number of shares.

All shares that are accepted in the tender offer are purchased at the same price, irrespective of whether they were tendered at a lower price.

In case of Hilltop Holdings, if the tender offer is subscribed fully, it will purchase shares between 16,666,666 and 19,178,082, or 18.5% and 21.3% of its outstanding common stock.

The directors and executive officers of the company will not tender any of their shares. In fact, any shares tendered can be withdrawn prior to the expiration of the offer.

Also, the tender offer is not contingent upon any minimum number of shares being tendered.

The “Offer to Purchase” and the “Letter of Transmittal” that the company files with the SEC will contain important information about the terms and conditions of the tender offer and these must be followed by shareholders.

Goldman Sachs & Co. LLC, a unit of Goldman Sachs GS is acting as the dealer manager for the tender offer.

Per Hilltop Holdings’ board of directors, such a tender offer is an efficient way to provide all shareholders with the opportunity to tender all or a portion of their shares. In fact, in the future, the board may consider additional tender offers based on a variety of factors, including the market price of the stock.

Our Take

Supported by a solid balance sheet position, Hilltop Holdings has been continuously enhancing shareholder value through efficient capital deployment activities. In October 2016, the company announced a dividend for the first time and since then it has been increasing dividends on a regular basis. The last dividend hike was announced in January 2020.

The company also has an efficient share buyback plan in place. While currently, it has suspended any share repurchases on account of continued uncertainties due to the coronavirus pandemic, it is expected to be able to sustain efficient capital deployments in the future, given its lower debt/equity ratio compared with the industry and strong capital position.

Shares of Hilltop Holdings have gained 38.4% over the past six months compared with the industry’s rally of 9.6%.

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A couple of better-ranked stocks from the finance space are mentioned below.

Old Second Bancorp OSBC has witnessed an upward earnings estimate revision of 8.5% for 2020 over the past 60 days. It currently carries a Zacks Rank #2 (Buy). The stock has gained 13.5% over the past six months.

Independent Bank Corporation’s IBCP ongoing-year earnings estimates have moved up 28.2% in the past 60 days. Further, the company’s shares have gained 3.3% over the past six months. At present, it carries a Zacks Rank of 2.

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