Concerned Shareholder Shaul Kopelowitz Issues Open Letter Regarding Opposition to Pacific Enterprise Bancorp’s Merger with Baycom Corp

Rhea-AI Summary

Shaul Kopelowitz, a major shareholder of Pacific Enterprise Bancorp (PEBN) with 9.9% ownership, expressed strong opposition to the company's proposed merger with BayCom Corp (BCML). He criticized the merger as flawed, highlighting that it undervalues PEBN shares by $3.30 relative to book value. Kopelowitz argued that the merger does not serve shareholder interests and contrasts negatively with industry trends. He is advocating for alternative strategies, including asset liquidation, to enhance shareholder value.

Positive

• Kopelowitz's significant shareholding may lead to increased scrutiny of management decisions.
• Potential for shareholders to advocate for better alternatives.

Negative

• Proposed merger undervalues PEBN shares by $3.30 per share.
• BCML has underperformed against industry benchmarks by 18% and 50% over the last one and two years, respectively.
• Concerns about management fulfilling fiduciary duties in the merger process.

NEW YORK--(BUSINESS WIRE)-- Shaul Kopelowitz, who holds approximately 9.9% of the outstanding common shares of Pacific Enterprise Bancorp (OTC: PEBN), today issued the below open letter to shareholders. Mr. Kopelowitz has also submitted an application to the Federal Reserve for a non-objection to acquire additional PEBN shares.

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Fellow Shareholders,

I am one of the largest shareholders of Pacific Enterprise Bancorp (“PEBN” or the "Company”), with shareholdings of approximately 9.9%. I am writing to you today regarding my strong opposition to the Company’s proposed merger with BayCom Corp (“BCML”).

In my view, the Board of Directors (the “Board”) approved an ill-conceived and strategically flawed merger agreement last year. At the time of the announcement, the proposed merger short-changed shareholders by $3.30 per share in book value.¹

It appears that no non-distressed California bank since the Great Recession has sold for less than book value.² In fact, the average premium for a regional bank merger or acquisition over the last five years is 173.25% of tangible book value.³ This leads me to question whether the Board fulfilled its fiduciary duties and ran a proper market test before entering into this seemingly value-destructive deal. In conversations with other industry participants, I have heard that other potential acquirors were not even given a proper chance to participate in the bid process.

Management has naturally argued that the combination with BCML, while at a discount, is still better in the long run for shareholders. In my opinion, this is a baseless and exceedingly pessimistic view of PEBN and an overly optimistic estimation of BCML's potential to create value for shareholders. BCML has underperformed the benchmark industry ETF by 18% and 50% over the last one- and two-year time horizons, respectively.⁴ Additionally, while banking sector indices and ETFs are hitting all-time highs, BCML’s share price peaked years ago in 2018.⁵ Yet, BCML’s chief executive officer’s compensation has increased more than 54% over that time period.⁶

The reality is the aforementioned metrics do not match the rosy picture painted by management when advocating for the merger. As the classic Wall Street adage goes: Tying two rocks together will not make them float. The solution for a bank trading at a discount to book value is not to merge it with another bank that is also trading at a discount to book value.

If this merger was truly market-tested and BCML’s offer was actually the best available, I question why the Board decided to ultimately move forward. In my opinion, this is a transaction that does nothing for shareholders – other than deprive them of value. I firmly believe there are superior alternatives available that do not subject shareholders to a punishing discount, including liquidating the Company’s assets and returning the equity to shareholders.

I am voting against the proposed merger and cannot see how any other shareholder could reach a different conclusion. I welcome the opportunity to engage with fellow shareholders and explain my opposition to the deal. I also welcome the chance to speak with the Board about value-enhancing alternatives once this deal is hopefully voted down.

Sincerely,

Shaul Kopelowitz

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¹ Based on $21.08 in Book Value on the same date, available at https://www.pacificenterprisebank.com/home/fiFiles/static/documents/Disclosure%20statement%20093021.pdf.
² S&P Global Market Intelligence.
³ S&P Global Market Intelligence.
⁴ Total shareholder return for BCML and SPDR S&P Regional Banking ETF calculated as of the close on December 7, 2021.
⁵ August 26, 2018 closing price of $26.68, as reported by Nasdaq.
⁶ Based on reported total compensation of $1,444,511, $1,999,940, and $2,226,361 in 2018, 2019 and 2020, respectively.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211208005590/en/

MKA

Greg Marose / Bela Kirpalani, 646-386-0091

gmarose@mkacomms.com / bkirpalani@mkacomms.com

 

Source: MKA Communications on behalf of Shaul Kopelowitz

FAQ

What is Shaul Kopelowitz's stance on PEBN's merger with BCML?

Shaul Kopelowitz opposes the merger, arguing it undervalues PEBN's shares.

How much of Pacific Enterprise Bancorp does Kopelowitz own?

Kopelowitz owns approximately 9.9% of PEBN's outstanding common shares.

What financial implications does the PEBN and BCML merger have?

The merger is seen as value-destructive, as it undervalues PEBN shares and does not align with market standards.

Why does Kopelowitz believe the merger should be voted down?

He believes there are better alternatives available that would not subject shareholders to a discount.

What are the performance metrics for BayCom Corp compared to PEBN?

BCML has underperformed the benchmark industry ETF by 18% and 50% over the past one and two years, respectively.