Current Price – $13.45
Expected Payout - $14.41
Upside – 7%
Expiration Date – mid 2018
This idea was shared by Thinley.
Nano Financial Holdings is offering to acquire Californian bank CKTM at $14.41 per share (59% premium to pre-announcement price). Current spread stands at 7.1%. Transaction is expected to close in mid 2018.
Nano is a special purpose acquisition vehicle (not listed) that was established in 2017 and already raised $60m in stock subscriptions. It's stated purpose is to acquire one or more commercial banks in California. Nano is run by Mark Rebal who recently (2016) sold his managed Californian Republic Bank - capitalization of $52m at inception in 2007 and $290m at the time of sale in 2016. So Nano seems to have been created so that Rebal can repeat his playbook of growing Californian Banks. Rebal's expertise coupled with already available financing suggests that Nano is unlikely to walk away from the transaction.
CKTM is being acquired at 1.8x 2016 BV, 58x estimated of earnings (based on latest financials), which seems to be a rather fair valuation relative to other bank acquisition deals in the West Coast (1.66-1.87x BV).
Transaction is subject to CKTM shareholder approval. Also quite importantly part of consideration will be paid in Nano stock (not listed yet and no valuation/exchange ratio indicated), but only for 'accredited investors'. From press release:
"In order to preserve and protect the goodwill of CBTV, in conjunction with entering into the Definitive Agreement Nano requested that certain accredited CBTV shareholders agree to exchange a portion of their CBTV shares of common stock for newly issued shares of Nano Class A Common Stock (“Exchange”) estimated to be not less than 25% and up to 49% of the total number of outstanding shares of CBTV common stock."
This stock part of acquisition and ambiguity around it (i.e. will retail investors also receive Nano stock as part of consideration) is likely the main reason for the spread to exists.
My understanding is that smaller retail shareholders will receive cash only and accredited investors current insiders/management who will continue to be invested in the bank through Nano stock ownership.. However, I do not have any breakdown of CKTM shareholder base, so this is a bit of speculation.