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Jason Knapp

Two Thrift Conversions That Are Ripe For A Takeover...Special Situation Investing News - 9/8/2015

Followers of special situation investing know that thrift conversions, aka demutualizations, are often fertile hunting grounds for attractive investment opportunities.  For those of you who are not familiar with this special situation investing trick so to speak, I refer you to a great article on the subject by The Manual of Ideas:

Thrift Conversions: Is Anyone Paying Attention

As I mentioned in a post recently, the pipeline of new thrift conversions has all but dried up, with only three in the pending right now.

That's less than idea for people looking for investment opportunities in the sector, but it does not mean that it's devoid of opportunities. 

Tim Melvin of, who is a big fan of this type of investment, recently wrote up another interesting article on thrift conversions. He focused on an interesting subsection of demutualizations, banks that converted from thrifts back in 2011. What is so special about banks that converted in that year?  Converted banks are banned from being bought for three years after their initial conversion. That means that the 18 banks that converted from thrifts in 2011 have just had their moratorium on being bought out lifted. Institutions that convert from thrifts to publicly traded banks are taken over a very high percentage of time. How often? I haven't seen any recent statistics on the subject, but historically 75% of thrift conversions have been taken over within five years or less.

One bank that Melvin believes is an attractive takeover target right now is ASB Bancorp $ASBB

A chart of $ASBB (blue) vs. the S&P 500 (red) since conversion (click to enlarge)

ASB Bancorp trades at just under book value (98%) when the average converted thrift is taken over at 135% of book. Furthermore, the bank's list of large shareholders includes two activists who would like to see it taken over Lawrence Seidman and Firefly Value Partners.

Another thrift conversion that Melvin believes is an attractive takeover target right now is Atlantic Coast Financial $ACFC

A two-year chart of $ACFC (blue) vs. the S&P 500 (red) (click to enlarge)

Atlantic Coast Financial trades for right around book value, again a discount to what a bank would likely have to pay in a takeover.  It also has a successful bank investor as a major shareholder, PL Capital with 6.4%.

2011 Thrift Conversions Make Good Takeover Targets

Melvin actually published another article on thrift conversions recently that might be of interest as well:

Not Much to See Here -- Except Profits

The more recent conversions mentioned in it include, Kearny Financial $KRNY, which trades at 87% of book value, Beneficial Bancorp $BNCL88% of book value and First Northwest Bancorp $FNWB at 82%.

And now for the rest of the Special Situation Investing News:



Bayer to List Polymer Business Covestro in 4th Quarter I.P.O.

As Pfizer $PFE Closes Hospira Acquisition, Analysts Speculate About Spinoff

Qualcomm president says splitting company may not create value

Horizon Global: Look Beyond The Horizon For This Recent Spin-Off


Whale Watching:

Mario Gabelli on CNBC this morning. Gabelli: Looking at years, not weeks

The Morning Brief: Marcato, Pershing Square Slip Into the Red

The Morning Brief: A Badly Timed Bet on David Einhorn

Judge’s Ruling Offers Peek Into Private Equity’s Secret World

Phillips 66 - Is It Time To Follow Buffett Into This Income Stock?

New Berkshire Hathaway 13F


Activist Investors

Activist Investing Daily: The Big Boys

American Express May Get Same Treatment as Microsoft From ValueAct Capital

Barron's 13D Icahn Takes Big Freeport-McMoRan Stake, Pleasant Lake Presses MagnaChip

Activist Investing Daily: Hedge Fund Bloodletting

Hedge Funds Returns For Big 5 Activists

Hmmmmm...Not what I had in mind when I set up my Google Alert for "Value Act":

"Two Tru-Temper Shovels=Incredible Value=Act Fast! - $8"

Investment Write-Ups:

By far, the most interesting article of the day: Westaim: Heads I Win, Tails I Win More

Investment Thesis: Hyundai Motor Preferred

Kedar's Special Situation Investment Ideas: Special Situation Ideas for week of 7-September-15...

Whitestone REIT Is Now Yielding 10.5%

Sotheby's: Going Nowhere Since 1989.

20 Stocks With Surprisingly Big Dividend Yields

Medical Properties Trust: 65% Capital Appreciation Potential With A 7.75% Yield

Rooting for a September Swoon (at Least in These 2 Stocks)

From Special Opportunities Fund Semi-Annual report:

Pembina Pipeline - A Growing Canadian Midstream Now On Sale


Other Investing News:

G.E. Said to Get Approval From European Regulators to Buy Alstom Unit

Blackstone Agrees to Buy Strategic Hotels in $6 Billion Deal $BEE. Not much of a premium if you ask me.

Bank of America Board Under Fire for Combining Chairman and Chief Jobs



Is it now more likely that the Fed will raise rates later this month?

Economists React: ‘A September Rate Hike Is Basically a Coin Flip’


On an unrelated note, I'm hosting a fundraiser for St. Jude's Children's Hospital. If anyone would like to donate, here's a link. Thanks.

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