Activist investor Lawrence Seidman, who specializes in banks, has disclosed his second activist play in less than six weeks.
On Monday the founder of Parsippany, New Jersey–based Seidman & Associates disclosed that he owns 5.94 percent of West Bend, Wisconsin–based Westbury Bancorp. The disclosure comes a little more than a month after Seidman disclosed he owns 7.6 percent of Cheviot, Ohio–based Cheviot Financial Corp. Both financial institutions are typical Seidman targets: small community banking companies with a handful of branches.
Westbury Bancorp has about $550 million in assets, with ten branches. On May 12 it announced plans to repurchase up to 4.9 percent of its stock. Cheviot has 12 branches in Ohio.
Seidman has managed to keep a very low profile even though he has been buying undervalued small- and microcap banks and thrifts since 1983. Generally, he goes after targets that are selling below tangible book value and tries to encourage them to either sell to another institution or at least repurchase their shares.
Seidman is a former attorney with the Securities and Exchange Commission. From November 1991 to December 31, 2005, he was president and general counsel to Menlo Acquisition Corp., a now-defunct holding company for an environmental consulting business and a laboratory company.
In both of his most recent regulatory filings, Seidman uses the same boilerplate. He says he bought the stocks because they are good investments and that he may speak to management or the board. He also warns that he has a history of nominating directors.
Going back to 1995, Seidman has been involved in at least 37 activist situations with small banks, according to regulatory filings. He has initiated or been a part of about a dozen proxy fights. More than 20 of the bank companies were acquired by another institution after Seidman took a position. Seidman also has served on the board of directors of at least six of the companies, while associates of his sat on the boards of a number of other companies.
Seidman filed his first 13F only in February, however, to detail his equity holdings at year-end. At the end of the first quarter, he reported $161.5 million spread over 24 issues, all small local banks.
By far his biggest holding is in Center Bancorp, accounting for 45 percent of his assets. Seidman is also the bank’s largest shareholder, with 23.4 percent of the stock. He also has served on its board of directors since 2007, after winning a proxy fight that resulted in three Seidman nominees elected to the board after receiving 55 percent of votes, according to a report from the Conference Board, a New York–based trade association for companies. Center Bancorp’s second-largest shareholder is Leon Cooperman’s New York–based hedge fund firm, Omega Advisors.
Earlier this year Center Bancorp agreed to merge with ConnectOne Bancorp in a deal between the two New Jersey–based banking companies. That deal is expected to close on July 1. Under the merger agreement, Seidman plans to step down as a director. He also will receive a consulting fee of $50,000 per year for two years, and the combined company will reimburse him for the cost of medical insurance coverage during the two-year term of the agreement. Seidman also agreed that for one year after the merger closes, he will not seek election or nomination to, or serve as a member of, the board of any banking or financial services business in New Jersey.
In a role reversal, Seidman recently found himself the target of activists, according to a regulatory filing. Several investors filed a lawsuit against the two companies and their boards, alleging that the agreed-upon price for the merger undervalues ConnectOne. The suit also alleges that the terms of the merger agreement “impermissibly locked up the proposed transaction,” which precludes another institution from making a higher bid, and that the proposed transaction benefits insiders of ConnectOne. The investors also claimed the joint proxy statement and prospectus failed to disclose material information.
On April 25, however, the plantiffs “voluntarily dismissed” the lawsuit. Center said in a regulatory filing at the time that there was no negotiated settlement and the banks did not pay damages or attorneys’ fees to the plaintiffs or their counsel.
