At the current price of $36.50/share, BARI is trading at 170% of tangible book, 21.1x 2007 estimated earnings of $1.73, and about an 8.5% premium to core deposits.
Bancorp Rhode Island (BARI) has declined in value by 15.8% in the last month (it closed at $36.16 on 5/24/07 vs. $43.34 on 4/27/07). Most of the sell-off is related to BARI management prevailing in its recent proxy contest. As a result, some of the fast money that jumped in prior to the vote, expecting PL Capital would be elected to the board with 2 seats, is probably rushing to sell shares.
PL made the point they needed to make, even though they didn't win the proxy battle. In fact, I actually think BARI might be more likely to sell within the next year as a result. BARI had a staggered board consisting of 15 members. Each year, 5 members come up for re-election. Had PL won 2 of the 15 seats, the board room would have been an uncomfortable/hostile place with 2 board members wanting to sell the organization and 13 very opposed to it, led by the Chairman Malcolm Chase and the CEO Merrill Sherman -- both of them would have been hard to force into selling...they would have gone down fighting -- as I don't see either of them as people would want to appear as if they lost a battle in front of the Providence business community.
The scenario going into next year -- if management and the board decides to sell, it will be on his/her own terms. If they don't sell, they could face another proxy contest. Further, in early 2008, it is Merrill Sherman and Malcolm Chase who are up for re-election. Knowing that either or both could be voted off the board, I think BARI will consider selling sometime around the end of 2007 or early 2008.
What is the organization worth if they sell? There would be a bidding war as there are a number of banks that want into Rhode Island. BARI has scarcity value -- the only other bank of size is Washington Trust (WASH). I estimate there are probably 5+ bidders that have highly valued currencies which could pay $52+/share for BARI. Further, if a mutual from MA or a large credit union in MA were to convert and buy BARI in a merger conversion, if BARI holders were to get pre-IPO stock, the ultimate value could be higher.
Hopefully all of the large holders buy more stock. Further, maybe a few new investors will show up by next year. MFP Investors LLC (Michael Price) indicated the purchase of 50,000 shares in the first quarter of 2007 -- I'd be surprised if he stopped with that small of a position, given the amount of money he manages.
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