The SVB Financial Merger Continues To Be
Financially and Strategically Compelling
HoldCo’s Proposal Is Reckless, Founded on
Flawed Valuation Analyses and Misleading Assertions, and Value
Destructive
The Board of Directors of Boston Private Financial Holdings,
Inc. (NASDAQ: BPFH) (“Boston Private”), a leading provider of
integrated wealth management, trust and banking services to
individuals, families, businesses and nonprofits, today issued an
investor presentation and sent a letter to Boston Private’s
shareholders regarding the previously announced definitive merger
agreement with SVB Financial Group (NASDAQ: SIVB) (“SVB
Financial”). The investor presentation is available at
https://ir.bostonprivate.com/files/doc_presentations/2021/04/Investor-Presentation.pdf.
The letter and investor presentation reiterate why the SVB
Financial transaction continues to provide the best path for
maximizing value for Boston Private shareholders, and respond in
detail to HoldCo’s misleading assertions, unsubstantiated analyses
and reckless and illusory proposal that threatens to destroy
substantial shareholder value.
The Boston Private Board unanimously recommends that
shareholders vote on the WHITE proxy card “FOR” the proposed
transaction with SVB Financial and “FOR” the other matters to be
considered at the April 27, 2021 special meeting.
The full text of the letter from the Board of Directors to
shareholders follows.
April 7, 2021
Dear Boston Private Shareholders:
The special meeting of Boston Private
shareholders to approve the value-maximizing transaction with SVB
Financial, scheduled for April 27, 2021, is rapidly
approaching.
If the merger with SVB Financial is
completed, holders will be entitled to receive, for each share of
Boston Private common stock owned, $2.10 in cash and 0.0228 shares
of SVB Financial common stock, an implied value of $13.12 per share
of Boston Private common stock based on the closing stock price of
SVB Financial common stock on April 1, 2021, representing a 56%
premium to Boston Private’s unaffected share price as of
immediately prior to announcement of the transaction.
The Boston Private Board of Directors
(the “Board”) carefully considered the company’s available
alternatives and concluded that the transaction maximizes value
for, and is in the best interests of, all Boston Private
Shareholders. The Board unanimously recommends that you vote
on the WHITE proxy card “FOR” the proposed transaction with SVB
Financial and “FOR” the other matters to be considered at the April
27, 2021 special meeting to approve the transaction. You
can vote by mail, over the Internet or by a toll-free telephone
call. Simply follow the instructions on the attached WHITE
proxy card. We urge you to vote by telephone or over the
Internet to ensure your vote is received in time to be counted at
the special meeting.
Your vote is very important, regardless
of how many shares you own. The failure to vote your shares
or an abstention from voting has the same effect as a vote against
the transaction. The transaction cannot be completed unless
the merger agreement is approved by the affirmative vote of at
least 66 2/3% of the outstanding shares of Boston Private common
stock entitled to vote.
You may have received communications
from an entity called HoldCo Asset Management, LP (“HoldCo”)
seeking your support to defeat the transaction with SVB
Financial. The Board believes that HoldCo’s illusory proposal
is a reckless gamble based on arguments without merit that, if
successful, would imperil the value of your investment in Boston
Private.
Your Board is unanimous in its
opposition to HoldCo’s efforts and recommends you ignore their
communications and not vote any of their gold proxy cards. If
you have voted on a gold proxy card, please vote FOR the proposed
transaction with SVB Financial using a WHITE proxy card. Only
your latest dated vote counts.
THE TRANSACTION MAXIMIZES
VALUE FOR BOSTON PRIVATE SHAREHOLDERS
The Board believes that the
transaction with SVB Financial is a financially and strategically
compelling opportunity that maximizes value for, and is in the best
interests of, all Boston Private shareholders.
Compelling Valuation
Across multiple financial
metrics, the merger with SVB Financial represents one of the most
financially attractive bank deals in years.
As a result of the Board’s
negotiating efforts, SVB Financial increased the value of the
merger consideration offered from $7.60 per Boston Private share in
August 2020 to $10.94 per Boston Private share as of December 31,
2020, the last trading day prior to the date of announcement of the
merger agreement. At the time the transaction was announced,
the merger consideration represented the highest price to forward
earnings-per-share multiple and second-highest announcement date
premium in a major bank transaction in the past three years.1
This already-compelling premium has substantially increased since
that time as a result of the appreciation of SVB Financial’s share
price, and represents an implied value of $13.12 based on SVB
Financial’s closing price on April 1, 2021, corresponding to a 56%
premium to Boston Private’s unaffected share price as of
immediately prior to announcement of the transaction and a 21.2x
price to forward earnings-per-share multiple.2 The Board
believes that the transaction with SVB Financial provides
substantially higher and more certain value to Boston Private
shareholders than the company’s available alternatives.
The Right Partnership
SVB Financial is the right
partner for Boston Private, which will further benefit current
Boston Private shareholders once the merger is completed. It
has a differentiated platform with a long track record of stellar
execution and industry-leading growth, all of which will be
enhanced by the capabilities of the combined company to leverage
SVB Financial’s balance sheet, expansive client network and
position at the center of the innovation economy to augment Boston
Private’s wealth management solutions and accelerate value creation
opportunities for Boston Private shareholders. Not only does
the merger with SVB Financial provide significant immediate
financial benefits to Boston Private shareholders through a
compelling premium, the Boston Private Board believes that the
transaction will enable shareholders to benefit from the strategic
merits of the combination by participating in the upside potential
of the combined company, and is the clear long-term value
maximizing alternative for
shareholders.
The Right Timing
The Board’s decision to
capitalize on a compelling strategic opportunity with SVB Financial
and lock-in a fixed exchange ratio when it did has already
generated hundreds of millions of dollars in incremental value for
Boston Private shareholders above and beyond the almost 30% premium
already embedded in the implied value of the merger consideration
at the time of announcement of the transaction. As described
in detail below, delaying negotiations with SVB Financial in order
to pursue discussions with other potential counterparties, as
HoldCo has proposed, would have wiped away hundreds of millions of
dollars in value for Boston Private shareholders, while providing
no discernible benefits and significantly increasing various risks,
including the potential loss of the SVB Financial deal
altogether. The timing of the transaction was critical to
capturing the upside potential in the price of SVB Financial common
stock based on SVB Financial’s continued strong
performance.
The Right Process
Independent
Board Conducted Extensive Analysis and Carefully Considered All
Available Alternatives
In 11 meetings over the course of
several months, the Board assessed the company’s standalone plan
and the opportunities, risks and challenges associated with that
plan, and analyzed with its financial advisor the universe of
alternative potential strategic merger partners and the several
inbound inquiries it received. The Board was very familiar
with the strategic merits of those potential partners as well as
the merger consideration they would potentially be able to offer as
the result of the Board's and its' advisors' significant corporate
advisory, banking and financial services experience, and deep
industry knowledge. Accordingly, the Board determined
that:
- no potential merger partner
would be a better strategic fit or offer more favorable terms or
stronger prospects for future growth and value creation to Boston
Private shareholders than SVB Financial; and
- the transaction with SVB
Financial would provide more value, sooner, with significantly more
certainty and significantly less execution risk, than the company’s
standalone plan, while at the same time offering participation in
the long-term growth potential of the combined company at a level
that was unlikely to be achieved under the standalone plan.
The Board’s
Process Maximized Value Without the Risks Inherent in an
Auction
HoldCo repeatedly asserts that
the company referred to in Boston Private’s definitive proxy
statement as Company A “was offering a higher price than SVB was
offering at that time.” This is simply false. Neither
Company A nor any other party — other than SVB Financial — made any
offer or proposal to acquire Boston Private, either during the
negotiation process with SVB Financial or at any time since
announcement of the transaction. HoldCo’s distortions
underscore its inability to engage with real-world facts.
Having no on-the-ground experience with bank M&A processes,
HoldCo subscribes to a black-and-white, purely theoretical
philosophy by which auctions must automatically lead to the best
outcome for shareholders. But the transaction process
implemented by the Board was not an academic exercise undertaken in
an ivory tower — it was a real-world negotiation carefully designed
and calibrated with the advice of expert advisors to maximize value
for Boston Private shareholders. In the real-world, the tone
of a conversation matters, timing matters and reasoned and
experienced assessments of a potential acquiror’s preparation,
seriousness and ability to pay matter.
These nuances are lost on HoldCo,
but they are reflected in precedent bank transactions, where a
majority of target companies do not undertake auction processes,
and where auction processes generally do not produce better results
than bilateral negotiations.3 The reasons are simple:
the universe of potential strategic buyers for banks of Boston
Private’s size is limited and well-known to those in the industry;
to the extent that any such potential buyers are interested in a
strategic combination, they typically make their interest known to
targets proactively; and for a business whose principal assets —
its people — walk out the door at the end of every business day,
the risks of running a broad auction process and exposing the
company to potential leaks, market rumors and resulting employee
and customer attrition are real and need to be weighed against the
hypothetical and, in many cases, illusory benefits of running such
a process.
Yet HoldCo would apparently have
Boston Private open up its books and provide highly confidential
and competitively sensitive diligence materials and access to
employee and customer information to any competitor that expresses
even the slightest interest in discussing a possible transaction,
no matter how vague, soft or flimsy their overtures or terms might
be. The Board disagrees with that philosophy.
A review of the inquiries from
HoldCo’s three purported potential buyers confirms that there was
no credible reason for Boston Private to affirmatively pursue
further discussions with any of these parties, and that the Board
chose the value-maximizing process.
- Company A: Notwithstanding
HoldCo’s mischaracterizations, Company A never made any proposal to
acquire Boston Private. Instead, it approached Boston Private
casually based on speculation that Boston Private might already be
considering a strategic business combination and indicated that,
subject to numerous contingencies, it might consider a valuation at
a tangible book value multiple in a general price range of
$10.50. Company A never submitted any letter, indication of
interest or other written expression of interest, nor did it
propose any specific transaction terms, or indicate whether an
actual proposal was expected to be discussed with or approved by
its board of directors. The Board discussed and considered
Company A’s outreach and determined that it was highly speculative
and contingent. The Board also concluded that there was
greater upside potential in SVB Financial’s stock price, and
therefore in the value of the merger consideration, that would not
apply to Company A even if it were to submit an actionable proposal
at or around its indicated potential valuation level.
After considering all the facts, the Board concluded that
Company A was unlikely to (i) be a better strategic fit for Boston
Private than SVB Financial, (ii) offer terms more favorable to
Boston Private’s shareholders than those offered by SVB Financial,
or (iii) offer better prospects for future growth and value
accretion for the benefit of Boston Private’s
shareholders.
- September 2020 Inquiry:
HoldCo criticizes Boston Private for not inviting another party
that inquired about a transaction in September 2020 to participate
in an auction process. As previously disclosed, this party
inquired about a transaction at a 20-25% premium to Boston
Private’s then-current stock price, which was in the range of $5.50
per share, implying a transaction value of around $6.60 - $6.87 per
share. At that time, discussions with SVB Financial centered
around SVB Financial making a proposal valuing Boston Private at
approximately $9.25 per share, which the Boston Private Board
concluded was still an inadequate price. There was simply no
reason for Boston Private to waste time, money and effort, or
magnify the attendant confidentiality, competitive, employee and
customer retention risks, by engaging on an inquiry with such an
inferior value proposition.
- Similarly-Sized California-Based
Bank Holding Company: Finally, HoldCo suggests that Boston
Private should have engaged in transaction negotiations with a
California-based bank holding company of similar size to Boston
Private. As previously disclosed, in 2019 Boston Private
engaged in preliminary discussions with representatives of this
potential counterparty, which centered around an acquisition by
Boston Private of this counterparty — a completely different
transaction than the SVB Financial merger (or, for that matter, any
sale transaction advocated by HoldCo), in which Boston Private
would be paying a premium, instead of receiving one. Boston
Private had previously determined that such a transaction would not
be financially attractive or create meaningful value for Boston
Private shareholders, and that this company was not a strong
financial, cultural or strategic fit for Boston Private.
Accordingly, there was no reason to engage in further discussions
with this potential counterparty. HoldCo’s contention that
inviting this party — whose apparent interest was in being acquired
by Boston Private — to participate in an auction to acquire Boston
Private would have somehow generated competitive pressure and
resulted in SVB Financial delivering additional merger
consideration defies logic, and further underscores HoldCo’s lack
of understanding of real-world negotiating dynamics.
Far from lending support to
HoldCo’s auction theory, what these various informal inquiries
actually show is that the Board was extremely well-informed
regarding the pool of potential strategic counterparties that might
be interested in pursuing a strategic combination and the level of
consideration that they might be able and willing to offer.
If any of the parties that HoldCo asserts would have offered
superior financial terms, or indeed any other potential strategic
partner, were in fact interested in and capable of acquiring Boston
Private at a premium valuation relative to the merger with SVB
Financial, they would have submitted a proposal. None
did.
Contrary to HoldCo’s monolithic
view of M&A processes, the Board does not believe that there is
any single blueprint for how to achieve the best result in selling
a company. It is a fact- and context-specific determination
that requires careful consideration and evaluation of a number of
factors that bear on the risks and benefits of approaching
additional parties or instead pursuing a transaction with a company
that has made a compelling strategic offer. The Board ran a
robust, thorough and value-maximizing process for Boston Private
shareholders and successfully secured one of the highest premia of
any bank merger in years, and locked-in an exchange ratio at a time
that has allowed Boston Private shareholders to benefit from the
substantial upside in SVB Financial’s stock price.
HOLDCO’S PATH FORWARD IS
RECKLESS, NOT VIABLE AND EXPOSES BOSTON PRIVATE SHAREHOLDERS TO
SIGNIFICANT RISKS
While the Board has provided a
value-maximizing transaction with a compelling premium and
significant long-term upside prospects, HoldCo lacks any coherent
strategy or viable value proposition for Boston Private
shareholders, and its proposed “path forward” is illusory and would
expose you to major risks.
It is clear that prior to the
announcement of the SVB transaction, HoldCo was planning to launch
a proxy fight against the Board and advocate for a sale of the
company. But before HoldCo could do so, the Board capitalized
on the opportunity with SVB Financial, delivering a strategic
transaction at a price that maximizes value for Boston Private
shareholders. The Board preempted HoldCo’s platform by doing
what was right for Boston Private shareholders and acting at the
right time, but HoldCo is determined to move forward with its
contest anyway.
The result is a “path forward”
that is reckless, unrealistic and lacks any feasible means of
delivering additional value. Notwithstanding HoldCo’s claims
that the steps to achieving enhanced value are “simple and
straightforward,” they are in fact fraught with risk.
HoldCo’s Proposed Sale Process
Threatens To Expose Boston Private to Uncapped Damages
HoldCo continues to propose that
Boston Private “commence a competitive [sale] process
immediately.” But as the Board noted in its prior
communication to shareholders, commencing such a process would be a
willful breach of Boston Private’s obligations under the merger
agreement with SVB Financial, an inconvenient fact that HoldCo
knows, or should know if it had in fact read the publicly available
merger agreement, but has blatantly ignored in all of its
communications to you. HoldCo is either attempting to
deliberately mislead you or is willing to expose your company to
uncapped potential damages.
HoldCo’s proposed path forward
is a fantasy, and entirely illusory. Unless the parties
mutually agree to terminate the merger agreement, until the January
3, 2022 termination date is reached or another termination event
occurs, neither party can abandon the transaction and each must use
reasonable best efforts to complete the merger.
HoldCo’s Expectations of
Potential Acquirors Are Unrealistic and Unsupported
HoldCo has now implicitly
acknowledged that a previously unknown mystery acquiror is not
likely to materialize. As such, HoldCo is pinning its hopes
on a limited universe of potential acquirors, several of whom made
informal and preliminary inquiries of Boston Private that the Board
carefully evaluated and, as discussed above, determined (correctly)
were unlikely to result in terms more favorable to Boston Private
shareholders than those offered by SVB Financial. HoldCo has
not demonstrated why any of those parties, or for that matter any
other potential acquiror, would suddenly be likely to make a
proposal to acquire Boston Private, much less one that delivers
more value than the transaction with SVB Financial. To date,
no such proposal has been made. HoldCo may be comfortable
taking a flyer on the unlikely possibility of such a proposal
emerging; the Board is
not.
Proposed Slash and Burn Approach
Would Destroy Value
Perhaps understanding that
re-initiating a sales process is not feasible and that there is no
mystery acquiror waiting in the wings, HoldCo has pivoted to
proposing vague operational changes that amount to nothing more
than a slash and burn approach designed to artificially boost
short-term share price performance through excessive cost cutting
and return of capital, to the detriment of the long-term value of
the Boston Private franchise. HoldCo’s analysis, resting on
faulty and unsubstantiated assumptions, would fail to deliver value
to Boston Private shareholders on par with the SVB Financial merger
consideration even in the short term and likely result in
significant customer and employee attrition and irredeemable damage
to the Boston Private business. To make its plan appear to
create value, HoldCo makes a series of groundless assumptions,
including establishing cost-savings by reference to a set of peers
with very different business models, assuming multiple expansion
solely as a result of cost-cutting, and, most egregiously, assuming
that the company could buy back $115 million of its shares at $10
while bumping its share price to more than $17 — an assumption both
absurd on its face and that would raise serious questions under the
federal securities laws.
HoldCo’s standalone “plan,” which
might as well have been sketched out on the back of a napkin,
further illustrates the dangers of delegating the strategy for
ongoing operations of Boston Private and its subsidiaries to
HoldCo. This slash and burn approach that fails to deliver
value in the short term while destroying Boston Private’s long-term
prospects stands in stark contrast to the compelling value, upside
participation and certainty of execution that the SVB Financial
transaction will deliver for Boston Private shareholders.
HoldCo’s Withdrawal of Its Own
Nominees Demonstrates a Lack of Commitment and the Absence of a
Coherent Strategy
As the Board previously noted,
HoldCo was forced to withdraw its nomination notice with respect to
two of its nominees to the Boston Private Board — HoldCo’s own
co-founders Michael Zaitzeff and Vikaran Ghei — due to its parallel
threatened proxy fight against another Boston-based bank holding
company, Berkshire Hills Bancorp, Inc., where it also nominated Mr.
Zaitzeff to the board of directors. That HoldCo consciously
decided to forego the possibility of nominating a majority slate
that included HoldCo’s founders to the Boston Private Board in
favor of having a single representative on the Berkshire board
demonstrates HoldCo’s utter lack of conviction in the strength of
its arguments or its likelihood of success. Moreover, it
confirms that HoldCo does not have a coherent strategy. It
has a bag of risky, half-baked proposals and no idea how to execute
on them. Even if HoldCo’s three unaffiliated nominees were
elected to the Board and adopted HoldCo’s agenda, they would
constitute only a minority of the Board and would have no mechanism
to cause Boston Private to pursue HoldCo’s ill-advised and risky
gambles, and given HoldCo’s board seat at Berkshire Hills, a
competing bank operating in the same market as Boston Private, it
is far from clear that HoldCo would even be able to actively
participate, directly or indirectly, in key strategic decisions of
the Boston Private Board given antitrust, bank regulatory and
confidentiality considerations.
Though HoldCo has not
articulated a feasible “path forward,” all of its proposed roads
lead to the same dead end: giving up a compelling transaction
with certainty of value and significant upside in favor of a
collection of reckless gambles, each with substantial and readily
apparent risks, and highly theoretical and illusory potential
benefits.
HOLDCO’S MISGUIDED ATTACKS AND
BASELESS ASSUMPTIONS ARE NO SUBSTITUTE FOR THE BOARD’S INFORMED
VALUATION ANALYSES
In considering the SVB Financial
transaction, the Board and its advisors carefully evaluated Boston
Private’s standalone plan and the valuation it implied, and
determined that the SVB Financial transaction would deliver more
value, sooner, with significantly more certainty and significantly
less execution risk than the company’s standalone
plan.
In contrast, Holdco has not
undertaken any serious valuation analyses or engagement with Boston
Private’s standalone plan, and has made no attempt to defend its
naive “sum of the parts” and “contribution” analyses —
methodologies that are inapplicable to Boston Private’s business or
the transaction at hand, include numerous flawed assumptions and
ignore fundamental valuation principles. Instead of defending
its analyses, HoldCo has resorted to attacking the market’s
valuation of SVB Financial, using sleights of hand and pretending
the world did not change as a result of the pandemic.
Attacks Against SVB Financial Are
Misguided
HoldCo presents several purported
analyses that, while framed in different ways, boil down to a
single assertion: HoldCo believes that the market is
ascribing too much value to SVB Financial’s shares, and that it
knows better than the market.
HoldCo’s attacks against SVB Financial
have no basis in reality. As industry analysts recognize, SVB
Financial has a differentiated platform with exceptional growth
opportunities in key industries, along with a history of
operational excellence and credit quality that leaves little doubt
about its ability to successfully capitalize on these
opportunities. SVB Financial’s premium valuation is not a
short-term blip — it is based on a long-term track record of
successful execution: over the last ten years, SVB Financial
has significantly outperformed its peers on almost every key
metric. Accordingly, each of SVB Financial’s 1-, 3-, 5- and
10-year total shareholder returns far outpace its peers and banks
generally.4 The market again validated SVB Financial’s premium
valuation just two weeks ago, as SVB Financial successfully raised
$1 billion in a common stock offering from major institutional
investors in a single day at a price of $500 per share, implying a
price-to-earnings multiple of 24.4x.5
HoldCo’s attacks on SVB Financial
fly in the face of what the rest of the market already knows, has
known for years and has very recently validated — that SVB
Financial’s unique position at the center of the innovation
economy, fundamentally different balance sheet and earnings growth
opportunities and outstanding record of performance justify its
premium multiple.
HoldCo Is Living in a
Pre-Pandemic World
HoldCo attempts to undermine the
compelling value created by the SVB Financial transaction by
comparing the value of the merger consideration to Boston Private’s
pre-pandemic share price and referencing the parties’ pre-pandemic
performance. These comparisons are irrelevant, out of touch
with reality and fail to take into account the significant changes
in interest rates, the competitive environment and the businesses
and growth prospects of Boston Private, SVB Financial and their
respective clients arising out of the pandemic and ongoing
recovery. HoldCo is living in the past and focused on
pre-pandemic performance and share prices. The Board, on the
other hand, is focused on maximizing value for Boston Private
shareholders in the present and over the long-term — the Board
evaluated Boston Private’s future prospects in light of a changing
environment and determined that the transaction with SVB Financial
was the best way to maximize value.
Sleights of Hand Reinforce
HoldCo’s Mistakes
HoldCo’s attempt to reframe the
transaction consideration in terms of exchange ratio rather than
value is not only incorrect, it repeats the same mistakes that
HoldCo made in its valuation analyses and highlights how a process
managed by HoldCo would have produced inferior results.
HoldCo’s assertions that the Board “ineptly negotiated for lower
consideration as the process with SVB unfolded” and that SVB
Financial’s final offer represented a 22% decline in value are
blatantly false. The Board negotiated to increase the value
of the merger consideration from approximately $7.60 per Boston
Private share to $10.94 per Boston Private share at the date of
announcement of the transaction, a value reflecting the
second-highest premium in a major bank transaction in the last
three years. HoldCo’s attempted sleight of hand again ignores
the differing valuation and growth profiles of Boston Private and
SVB Financial and the resulting possibility that their share prices
would change at differing rates over time, while naively assuming
that SVB Financial (or any other potential acquiror) would
intentionally undervalue itself by negotiating a transaction
without regard for positive changes to its own valuation and growth
prospects.
And yet, the increase in SVB
Financial’s stock price, the very issue about which HoldCo
complains, would have been greatly exacerbated by HoldCo’s
suggestion that Boston Private invite other parties into an auction
process to somehow “keep SVB honest” about the market value of SVB
Financial’s shares. As HoldCo would have it, Boston Private
would have been mired in an auction process with bidders the Board
deemed unlikely to be competitive and, as a result, would have
missed its window to capture the potential appreciation in the
value of SVB Financial shares for the benefit of Boston Private
shareholders. Had Boston Private sought to prolong
negotiations with SVB Financial in order to run an auction process,
not only would Boston Private have risked losing the SVB Financial
transaction altogether, particularly in light of SVB Financial’s
final proposal being expressly conditioned on exclusivity, but even
if a transaction had materialized based on the ultimately agreed
pricing it would have cost Boston Private shareholders
approximately $240 million in aggregate consideration value.6
It was precisely those risks, along with the significant risks to
the Boston Private franchise from a confidentiality, competitive,
and employee and customer retention perspective, that the Board
carefully weighed against the potential benefits of rejecting or
attempting to delay SVB Financial’s final proposal and pursuing
discussions with other potential strategic parties. The Board
correctly concluded that those risks far outweighed any conceivable
benefits of delay.
THE BOARD RAN AN EXEMPLARY
PROCESS DELIBERATELY SEQUENCED TO AVOID POTENTIAL CONFLICTS
The Board’s thoughtful sequencing
of the negotiations with SVB Financial avoided conflicts to ensure
a result that maximized value for Boston Private
shareholders. HoldCo’s continued efforts to falsely paint the
transaction with SVB Financial as a conflict-ridden,
management-friendly deal have no basis in fact, do not hold up to
even the most cursory level of scrutiny, and are a desperate
attempt to gain traction where all substantive arguments have
failed.
The Board Ran a Model Process
The Board ran a thorough,
independent-director-driven process that was deliberately sequenced
to ensure that any negotiations between Mr. DeChellis or other
members of management and SVB Financial related to post-closing
employment or retention arrangements occurred only after
negotiations regarding the amount of the merger consideration and
the other material transaction terms had been finalized. All
members of the Boston Private Board other than Mr. DeChellis are
fully independent, and the Board is comprised of a sophisticated
and diverse group of directors with decades of collective financial
services experience. Negotiations were led by a working group
comprised of Mr. DeChellis and two independent directors with deep
M&A and transactional experience. The Board’s independent
Chair, Stephen Waters, was intimately involved in the key pricing
negotiations with SVB Financial, all of which took place more than
a month before SVB Financial first provided a term sheet to Mr.
DeChellis outlining the proposed terms for his continued employment
following completion of the merger. And the entire Board was
fully involved in overseeing the transaction process from start to
finish.
For the Board to have formed a
special committee to negotiate the transaction, as suggested by
HoldCo, would have been both unusual and value destructive.
Special committees are extremely rare — they have been used by
target boards in just 6% of major bank transactions over the past
ten years7 — and are appropriate where there is a true board
conflict that cannot otherwise effectively be mitigated, such as a
transaction in which a controlling shareholder stands on both sides
of a deal or conflicted directors have a special material interest
in the transaction. That was definitively not the case with
respect to Boston Private’s arm’s-length, third party merger
negotiations with SVB Financial. Given the sequencing of the
negotiations and the composition of the working group, the
formation of a special committee would have done nothing to
mitigate any purported “conflict.” Instead, it would have
deprived Boston Private of Mr. DeChellis’s operational expertise
during negotiations, which was crucial in demonstrating the value
of the company and its wealth management franchise to SVB
Financial. A transaction of the strategic importance of the
SVB Financial merger demands the careful review and consideration
of all directors and should, in the Board’s view, remain squarely
within the ultimate province of the full Board, which is exactly
what occurred.
Further, HoldCo’s contention that
the prospect of continued post-closing employment for Mr. DeChellis
represented an “irreconcilable conflict of interest” is based on
the false premise that Mr. DeChellis was likely to receive better
post-closing employment terms from SVB Financial than from any
other potential buyer. HoldCo’s misleading characterizations
rely on stale information, make apples-to-oranges comparisons of
target to actual compensation levels, and fail to acknowledge Mr.
DeChellis’s waiver of termination protections and forfeiture of
Boston Private equity awards. The fact is, Mr. DeChellis received
from SVB Financial post-closing employment arrangements on
customary and reasonable terms, in a strategic transaction where
his ongoing involvement in Boston Private’s wealth management
business is an important value driver.
Those arrangements are not unique
to the SVB Financial transaction — every other hypothetical
acquiror cited by HoldCo would have also acquired Boston Private in
a strategic transaction where Boston Private’s wealth management
business would have been an important value driver, and so would
have wanted to hire Mr. DeChellis. In fact, as disclosed in
Boston Private’s definitive proxy statement, in September 2020, one
such potential party had expressed interest in hiring away Mr.
DeChellis to run its wealth management business apart from an
acquisition, which Mr. DeChellis declined. Mr. DeChellis had
no reason to believe that the package offered by SVB Financial
would be any better than that offered by any other possible merger
partner, and therefore would have had no reason to direct the
transaction toward SVB Financial instead of another merger
partner. HoldCo’s contention that there was an
“irreconcilable conflict of interest” is wrong, and the Board
carefully designed a process to ensure that no such conflict could
arise.
HoldCo’s Assertions Regarding
Retention Arrangements Are False
In an even more brazen attempt to
mislead you, HoldCo falsely asserts that the one-time merger costs
expected to be incurred by SVB Financial “represent a direct
transfer of wealth from BPFH shareholders to BPFH
executives.” In reality, SVB Financial has offered BPFH
executives customary (and for a transaction of this size,
relatively modest) retention awards with aggregate value of up to
$7.5 million, roughly 3.5% of SVB Financial’s total assumed
restructuring costs and undoubtedly similar to what any other
acquiror of Boston Private would have offered to ensure continued
performance of Boston Private’s franchise. These retention
arrangements were put in place only after the merger was announced
and the pricing and other transaction terms were agreed, and are
appropriately structured for retentive purposes — executives will
not receive their full retention amounts unless they remain
employed with SVB Financial for a full four years after completion
of the merger.
Most importantly, there is no
basis for HoldCo’s assertion that these retention costs, or for
that matter any restructuring charges to be incurred by SVB
Financial in connection with the transaction, somehow reduced the
amount of the merger consideration payable to Boston Private
shareholders, which was negotiated more than a month before SVB
Financial put any retention arrangements in place or finalized its
due diligence and preliminary restructuring cost
analysis.
*****
In sum, the Board believes that
the transaction with SVB Financial is a financially and
strategically compelling opportunity and is the value-maximizing
alternative for all Boston Private shareholders. In contrast,
HoldCo’s proposed path forward is an ever-changing assortment of
reckless gambles based upon an indefensible valuation and supported
only by misleading assertions and unsubstantiated attacks.
The Board believes that betting the future of Boston Private on
HoldCo’s illusory proposal is a risk that is simply too grave to
tolerate.
For these reasons, and the
reasons set out in greater detail in Boston Private’s definitive
proxy statement mailed to shareholders and its other materials
filed with the SEC, the Board unanimously recommends that you vote
on the WHITE proxy card “FOR” the proposed transaction with SVB
Financial and “FOR” the other matters to be considered at the
special meeting.
Your vote is very important,
regardless of how many shares you own. The failure to vote
your shares or an abstention from voting has the same effect as a
vote against the transaction. The transaction cannot
be completed unless the merger agreement is approved by the
affirmative vote of at least 66 2/3% of the outstanding shares of
Boston Private common stock entitled to vote.
If you have any questions or need
assistance voting your shares, please contact Innisfree M&A
Incorporated, Boston Private’s proxy solicitor, by calling
toll-free at (877) 800-5187, or for banks and brokers, collect at
(212) 750-5833.
On behalf of the Boston Private
Board, thank you for your continued support of Boston Private.
Sincerely,
The Boston Private Board
About Boston Private
Boston Private is a leading provider of integrated wealth
management, trust and banking services to individuals, families,
businesses and nonprofits. For more than 30 years, Boston Private
has delivered comprehensive advice coupled with deep technical
expertise to help clients simplify their lives and achieve their
goals. The firm offers the capabilities of a large institution with
the superior service of a boutique firm to clients across the
United States. Boston Private is the corporate brand of Boston
Private Financial Holdings, Inc. (NASDAQ: BPFH). For more
information, visit www.bostonprivate.com.
Advisors
Wachtell, Lipton, Rosen & Katz is serving as legal counsel
to Boston Private and Morgan Stanley & Co. LLC is acting as
financial advisor to Boston Private.
Forward-Looking Statements
This communication contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including but not limited to SVB Financial’s and/or Boston
Private’s expectations or predictions of future financial or
business performance or conditions. Forward-looking statements are
typically identified by words such as “believe,” “expect,”
“anticipate,” “intend,” “target,” “estimate,” “continue,”
“positions,” “prospects” or “potential,” by future conditional
verbs such as “will,” “would,” “should,” “could” or “may,” or by
variations of such words or by similar expressions. These
forward-looking statements are subject to numerous assumptions,
risks and uncertainties, which change over time. Forward-looking
statements speak only as of the date they are made, and we assume
no duty to update forward-looking statements. Actual results may
differ materially from current projections. In addition to factors
previously disclosed in SVB Financial’s and Boston Private’s
reports filed with the U.S. Securities and Exchange Commission (the
“SEC”), the following factors, among others, could cause actual
results to differ materially from forward-looking statements or
historical performance: ability to obtain regulatory approvals and
meet other closing conditions to the merger, including approval by
Boston Private’s shareholders on the expected terms and schedule;
delay in closing the merger; the outcome of any legal proceedings
that have been or may be instituted against SVB Financial or Boston
Private; the occurrence of any event, change or other circumstance
that could give rise to the right of one or both parties to
terminate the merger agreement providing for the merger;
difficulties and delays in integrating Boston Private’s business or
fully realizing cost savings and other benefits; business
disruption following the merger; changes in asset quality and
credit risk; the inability to sustain revenue and earnings growth;
the inability to retain existing Boston Private clients; the
inability to retain Boston Private employees; changes in interest
rates and capital markets; inflation; customer borrowing,
repayment, investment and deposit practices; customer
disintermediation; the introduction, withdrawal, success and timing
of business initiatives; competitive conditions; the inability to
realize cost savings or revenues or to implement integration plans
and other consequences associated with mergers, acquisitions and
divestitures; economic conditions; the impact, extent and timing of
technological changes, capital management activities, and other
actions of the Federal Reserve Board and legislative and regulatory
actions and reforms; and the impact of the global COVID-19 pandemic
on SVB Financial’s and/or Boston Private’s businesses, the ability
to complete the proposed merger and/or any of the other foregoing
risks. Annualized, pro forma, projected and estimated numbers are
used for illustrative purpose only, are not forecasts and may not
reflect actual results.
Important Additional Information and Where
to Find It
In connection with the proposed merger, SVB Financial has filed
with the SEC a registration statement on Form S-4 that includes the
proxy statement of Boston Private and a prospectus of SVB
Financial. The registration statement on Form S-4, as amended, was
declared effective by the SEC on March 17, 2021, and Boston Private
commenced mailing of the definitive proxy statement/prospectus to
its shareholders on or about March 19, 2021. This communication
does not constitute an offer to sell or the solicitation of an
offer to buy any securities or a solicitation of any vote or
approval, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. INVESTORS AND
SHAREHOLDERS OF BOSTON PRIVATE ARE URGED TO READ THE REGISTRATION
STATEMENT AND THE DEFINITIVE PROXY STATEMENT/PROSPECTUS REGARDING
THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE
THEY CONTAIN IMPORTANT INFORMATION.
A free copy of the definitive proxy statement/prospectus, as
well as other filings containing information about SVB Financial
and Boston Private, may be obtained at the SEC’s Internet site
(http://www.sec.gov). Copies of documents filed with the SEC by SVB
Financial will be made available free of charge on SVB Financial’s
website at http://ir.svb.com or by contacting SVB Financial’s
Investor Relations department at 408.654.7400; 3005 Tasman Drive,
Santa Clara, CA 95054; or ir@svb.com. Copies of documents filed
with the SEC by Boston Private will be made available free of
charge on Boston Private’s website at http://ir.bostonprivate.com
or by contacting Boston Private’s Investor Relations department at
617.912.4386; 10 Post Office Square, Boston, MA 02109; or
abromley@bostonprivate.com.
Participants in the
Solicitation
SVB Financial, Boston Private and certain of their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies from the shareholders of Boston
Private in connection with the proposed merger. Information about
the directors and executive officers of SVB Financial is set forth
in the proxy statement for SVB Financial’s 2021 Annual Meeting of
Stockholders, which was filed with the SEC on March 4, 2021, and
other documents filed by SVB Financial with the SEC. Information
about the directors and executive officers of Boston Private is set
forth in Boston Private’s Form 10-K for the year ended December 31,
2020, as amended, and other documents filed by Boston Private with
the SEC. Additional information regarding the interests of those
participants and other persons who may be deemed participants in
the transaction may be obtained by reading the definitive proxy
statement/prospectus regarding the proposed merger. Free copies of
this document may be obtained as described in the preceding
paragraph.
_______________________ 1 Bank transactions in excess of $500
million since January 1, 2018. 2 Based on equity research consensus
2021 earnings per share estimates of $0.62 per share as disclosed
in Boston Private’s definitive proxy statement. 3 Bank transactions
in excess of $500 million since January 1, 2018. 4 As of April 1,
2021. SVB Financial 1-year, 3-year, 5-year and 10-year total
shareholder return (“TSR”) of 245%, 101%, 369% and 742%, as
compared to peers’ TSR of 127%, 18%, 124% and 198% and median of
the KBW Nasdaq Bank Index TSR of 114%, 21%, 105% and 181% over the
same periods. Peers based on Morgan Stanley fairness opinion
analysis, other than People’s United Financial, Inc., where trading
has been disrupted by the announced sale to M&T Bank
Corporation. 5 Based on estimated 2021 earnings per share of $20.52
per Thomson Reuters median street estimates as of March 22, 2021,
following SVB Financial’s Form 8-K providing updated guidance. 6
Applying the agreed-upon pricing formula 30 trading days later
would have yielded an exchange ratio of 0.0168x and a current
implied value of the merger consideration of $10.22 per share, or
approximately $840 million, as compared to the actual current
implied value of the merger consideration of $13.12 per share, or
approximately $1.08 billion, in each case based on SVB Financial’s
closing price on April 1, 2021. 7 FactSet data as of March 31, 2021
for bank transactions in excess of $500 million since January 1,
2010.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210407005384/en/
Investor Relations Adam Bromley (617) 912-4386
abromley@bostonprivate.com
Media Lucy Muscarella (617) 912-4402
lmuscarella@bostonprivate.com
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