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Boston Private Fires Back at Activist Investor

Boston Private hits reply to HoldCo Asset Management's claim that a proposed deal “grossly” undervalues the firm to pursue "pie-in-the-sky" wealth management.

The board of directors of Boston Private Financial Holdings, parent company of bank and trust firm Boston Private, sent a letter to shareholders in support of the firm’s planned $900 million sale to Silicon Valley Bank, calling public attempts by an activist investor to derail the deal a “reckless gamble.”

In January, HoldCo Asset Management, a New York-based investment fund which owns 4.9% of Boston Private’s stock, sent a scathing letter to Boston Private Bank & Trust CEO Anthony DeChellis and Chairman Steve Waters accusing the executives of failing to find a suitable buyer through a competitive bidding process and undervaluing the company’s traditional banking business in order to pursue a sale that would further a “pie-in-the-sky” wealth management strategy.

Now the directors of Boston Private have fired back.

HoldCo’s "roll-the-dice" attempt to take control of the Boston Private Board and find alternatives to the sale "ignores the significant risks" and rests on an "unfounded hope that a previously unknown acquiror will suddenly materialize to deliver more value,” said the board, led by Waters of Compass Partners Capital LLC, a Stamford, Conn.-based private investment firm, in its shareholder letter.

HoldCo Asset Management could not be reached for comment and Boston Private declined to comment further.

Silicon Valley’s offer, valued at $14.67, was a 74% premium to Boston Private’s $8.45 share price at the end of December, the directors said.

HoldCo’s “shoddy” analysis of the value of Boston Private “ignores the fundamentally different financial, growth and valuation profiles” of the banks. HoldCo's analysis gives Boston Private a valuation 2.8 times its stock price at the time of the announced merger. “Not one major bank merger in the last 10 years has included a premium at that level—highlighting just how outlandish HoldCo’s analysis is,” the shareholders letter states.

Boston Private directors said HoldCo managers proved their “inexperience” when it came to banking when the activist investors’ had to withdraw nominees to Boston Private’s board given they were in a “parallel threatened proxy fight” with the parent of Berkshire Bank. The hedge fund was evidently unaware of longstanding banking laws prohibiting such proposed director interlocks, the directors wrote.

“HoldCo is an activist hedge fund with no prior experience managing any company, much less a bank, and no apparent familiarity with the regulatory regime under which Boston Private operates,” the directors wrote.

HoldCo’s accusation that Boston Private executives were unfairly profiting from the deal is also false, the letter states.

CEO Anthony DeChellis compensation packaged with SVB was worked out after the deal was negotiated, and DeChellis waived termination protection when it came to the conversion of his Boston Private equity to SVB equity and awards. Other Boston Private execs will not receive retention awards unless they stay with SVB for four years.

Around the same time HoldCo published the letter, at least four law firms publicly announced they would also investigate the sale on behalf of potential shareholder litigants.

Since the announcement of the pending sale, one advisory team has announced its departure from Boston Private for a Los Angeles-based RIA named Lido Advisors. Advisors Jeffrey Kaufman and John Tassone who are based in Boca Raton, Fla., left Boston Private in March.

Boston Private shareholders will vote on the proposed merger at a special meeting April 27.

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