Boston Private Financial Holdings Inc
Boston Private Financial — Proxy Contest (March 2021)
50 slides from Boston Private Financial's proxy contest presentation, Mar 30, 2021
Slide 1: Value for BPFH: Vote Against the SVB Merger
Value for BPFH: Vote Against the SVB Merger March 30, 2021
Slide 2: Certain information concerning participants
Certain information concerning participants HoldCo Opportunities Fund III, L.P. ("HoldCo Fund"), together with the participants named herein (collectively, "HoldCo"), intends to file a preliminary proxy statement and accompanying WHITE proxy card with the Securities and Exchange Commission to be use
Slide 3: Disclaimer
Disclaimer This presentation (the “Presentation”) is for discussion and general informational purposes only. This Presentation is not investment advice, an investment recommendation, or an offer to buy or sell or the solicitation of an offer to buy or sell any securities, including without limitatio
Slide 4: Table of Contents
Table of Contents 4 I. ABOUT HOLDCO 7 II. VA LUE FO R B P F H: W H Y I N V ESTOR S S H O ULD VOTE AG AINST T HE M E RGER 12 A. PROCESS 21 B. CONFLICTS 28 C . V A L U AT I O N 45 III. A B E T T E R P AT H F O R W A R D F O R B P F H 3
Slide 5: I. About HoldCo
HOLDCO ASSET MANAGEMENT |. ABOUT HOLDCO
Slide 6: About HoldCo
About HoldCo • HoldCo was founded in 2011 by Vik Ghei and Misha Zaitzeff and has over $1 billion regulatory assets under management (“AUM”) as of February 28, 2021 • Over the past 7 years, HoldCo has made over 120 investments totaling approximately $1.3 billion • HoldCo’s funds currently own nearly
Slide 7: HoldCo and its Principals have substantial experience investing in U.S. banks
HoldCo and its Principals have substantial experience investing in U.S. banks since the financial crisis HoldCo was formed in Fund II invested connection with a spin- approximately 41% of its Fund III invested off of investments made capital commitments in approximately 80% Principals invested in do
Slide 8: II. Value for BPFH: Why Investors Should Vote Against the Merger
II. VALUE FOR BPFH: WHY INVESTORS SHOULD VOTE AGAINST THE MERGER 7
Slide 9: Why we are invested in BPFH
Why we are invested in BPFH • HoldCo is one of BPFH’s largest shareholders, owning 4,049,816 shares (4.9% of outstanding shares) with a current market value of approximately $54 million(1) • We invested in BPFH for the following reasons: ✓ Valuation: One of the lowest valued U.S. banks when we becam
Slide 10: Why investors should vote against the Merger
Why investors should vote against the Merger Non-Existent Sales Process Conflict-Riddled Negotiations Unacceptable Valuation 9
Slide 11: Why investors should vote against the Merger (cont'd)
Why investors should vote against the Merger (cont’d) Non-existent sales process: 1) 1 No process: BPFH’s “process” was anything but – the Company chose to negotiate with only one party (SVB) while keeping other interested buyers completely in the dark 2) 2 Higher offer price: For reasons we cannot
Slide 12: Lack of process and conflict-riddled negotiations shortchanged BPFH shareholders
We believe the lack of a comprehensive process and conflict- riddled negotiations shortchanged BPFH shareholders We believe BPFH shareholders deserve far better than the current Merger terms Summary of BPFH Valuation Methodologies as of March 26, 2021 $30.00 $26.58 $26.94 $25.00 $25.00 $21.75 $20.21
Slide 13: A. Process
HOLDCO ASSET MANAGEMENT A. PROCESS 12
Slide 14: Why investors should vote no: Non-existent sales process
Why investors should vote no: Non-existent sales process We believe BPFH’s choice to negotiate exclusively with SVB instead of conducting a competitive sales process deprived shareholders of the opportunity to discover BPFH’s true value This is particularly concerning to us since at least three
Slide 15: Failure to run a competitive process deprived shareholders of price discovery
We believe BPFH’s failure to run a competitive process deprived shareholders of true price discovery Invited to # of Bid Best Offer at Time Interested Party Source Bid? Revisions of SVB Exclusivity SVB Merger announcement YES 6 $10.00-$10.50 Company A S-4 NO 0 $10.50 Unnamed Company S-4 NO 0 NA Firs
Slide 16: Negotiating with only one potential buyer is highly atypical
Negotiating with only one potential buyer is highly atypical, particularly given the inbound interest from other parties Based on precedent transactions(1), BPFH’s decision not to conduct a sales process is highly irregular • Bank sellers in other bank transactions contacted a median of 5 buyers and
Slide 17: SVB's final offer is materially worse than where it started
SVB’s final offer is materially worse than where it started, making the absence of a process even more egregious SVB Offer Price / SVB Price Throughout Negotiation Process(1) Mr. DeChellis tells Company A Company A CFO tells Morgan Stanley Company A CEO CEO “not specifically pursuing “interested in
Slide 18: No credible rationale for dismissing Company A's overtures
In our view, BPFH provides no credible rationale for dismissing Company A’s repeated overtures • In early September 2020, the CEO of Company A contacted Mr. DeChellis about a transaction • Mr. DeChellis told the CEO that “the board was not specifically pursuing a sale of the company at that time.” •
Slide 19: No credible rationale for dismissing the other unnamed buyer's interest
In our view, BPFH provides no credible rationale for dismissing the other unnamed buyer’s interest • On September 29, 2020, the CEO of a subsidiary of a wealth management and investment banking firm contacted Mr. DeChellis about a potential transaction at a valuation of up to a 20-25% premium to Bos
Slide 20: Mr. DeChellis appears to have misled another potential partner
Mr. DeChellis appears to have misled another potential partner who expressed an interest in BPFH • After HoldCo issued its first press release on January 5, 2021 outlining our concerns about the Merger, First Foundation CEO Scott Kavanaugh sent us the email below in which he mentions that he “had be
Slide 21: Board's rationale for granting exclusivity to SVB not compelling
We do not find the BPFH board’s rationale for granting exclusivity to SVB at all compelling BPFH Board Contention HoldCo Position • “There were unlikely to be other counterparties who • At least three buyers expressed interest, one of would be a better strategic fit for Boston Private which (Company
Slide 22: B. Conflicts
HOLDCO ASSET MANAGEMENT B. CONFLICTS 21
Slide 23: Why investors should vote no: Conflict-riddled negotiation
Why investors should vote no: Conflict-riddled negotiation We were surprised and disappointed to learn that BPFH did not establish an independent committee of the board to systematically explore strategic alternatives Upon further review of this transaction, we believe such a committee was espec
Slide 24: Mr. DeChellis was irreconcilably conflicted and financially incentivized
We believe Mr. DeChellis was irreconcilably conflicted and financially incentivized to deliver BPFH to SVB • Mr. DeChellis only recently joined BPFH as CEO in BPFH 2019 Strategic Plan late 2018 after the abrupt departure of former CEO Clay Deutsche • In May 2019, Mr. DeChellis and his executive team
Slide 25: Stratospheric merger costs: corporate wealth redistribution
With stratospheric merger costs, we view the merger as an exercise in corporate wealth redistribution We believe BPFH struck a deal that was lucrative for BPFH executives at the expense of shareholders • To put this deal in perspective, the $200M merger costs represent 4.25x the anticipated annual c
Slide 26: Merger costs are a huge outlier compared to comparable transactions
The merger costs are a huge outlier compared to comparable transactions reviewed by HoldCo Comparable Transactions by Merger Costs / Cost Saves • Out of 40 comparable transactions reviewed M erger C osts / M erger C osts / by HoldCo, this one ranks dead last based on Buyer/Target C ost Saves Deal Va
Slide 27: SVB is the highest paying public bank in the U.S.
Could the fact that SVB is the highest paying public bank in the U.S. have biased BPFH management’s judgment? “…and then third is compensation. So we got to pay fairly, no question. And we'll do that -- we do have retention built into this to make sure that over the next year to 2 years that people
Slide 28: Financial advisor Morgan Stanley was also conflicted
We believe BPFH’s financial advisor, Morgan Stanley, was also conflicted and incentivized to deliver BPFH to SVB • Prior to 2019, Morgan Stanley had never participated in a capital offering for SVB despite SVB having raised capital 12 times for a total of $2.8B in proceeds with 21 different investme
Slide 29: C. Valuation
HOLDCO ASSET MANAGEMENT C. VALUATION 28
Slide 30: Why investors should vote no: Grossly inadequate valuation
Why investors should vote no: Grossly inadequate valuation We view this transaction as a fire sale struck during a pandemic when BPFH shares were floundering along with the broader banking sector while SVB shares were at an all-time high We believe SVB has disproportionately benefited from its t
Slide 31: SVB took advantage of a temporary valuation disconnect from the pandemic
We believe SVB took advantage of a temporary valuation disconnect created by the global pandemic • Prior to the Covid pandemic, SVB and BPFH Pandemic Stock Price Performance: 1/1/2020 to 1/4/2021 traded at comparable P/E valuations 52% • In 2019, BPFH traded at 12.3x NTM EPS while SVB traded at 11.3
Slide 32: The so-called premium would have been a discount as recently as June 2020
Due to this valuation disconnect, the so-called premium would have been a discount as recently as June 2020 • The massive surge in SVB’s stock price, coupled with BPFH’s declining share price, allowed SVB to offer BPFH a premium on the day the deal was announced • However, the predominantly stock-ba
Slide 33: BPFH shares have underperformed and trade at a discount
Even with the so-called premium, BPFH shares have underperformed and continue to trade at a discount • We view the Merger as a fire-sale transaction struck during a global pandemic in which BPFH shares, along with the banking sector at large, were floundering at valuation levels last seen during the
Slide 34: Premium is low compared to transactions with depressed targets
The premium is particularly low compared to transactions where the target was trading at a depressed valuation • BPFH was trading at approximately 90% of tangible book value before the transaction due to the pandemic and investor concerns about management’s wildly ambitious strategic plan • Other si
Slide 35: SVB is shortchanging BPFH shareholders
Our analysis indicates that SVB is shortchanging BPFH shareholders • In our view, SVB was able to buy BPFH for a bargain price due to the lack of a competitive process • In the transactions reviewed by HoldCo, buyers typically pay a price that generates a tangible book value dilution earnback period
Slide 36: Contribution analysis suggests much higher value for BPFH
Our contribution analysis also suggests a much higher value for BPFH than the current consideration • On every relevant metric that we have evaluated, BPFH is contributing between 5% and 10% of the combined entity • Still, the aggregate merger consideration currently represents only 4% of the combin
Slide 37: Morgan Stanley's worst case for BPFH and best case for SVB yields higher value
Even Morgan Stanley’s worst case valuation for BPFH and best case for SVB yields meaningfully higher value Morgan Stanley’s fairness opinion suggests a much higher value for BPFH • If we apply the top quartile valuation multiples to SVB’s metrics and bottom quartile valuation multiples to BPFH’s met
Slide 38: Consideration values BPFH at historically low multiples
The consideration values BPFH shares at historically low absolute and relative multiples • Despite SVB’s sky-high valuation, the consideration values BPFH shares at historically low levels compared to comparable transactions(1) • We believe the buyer’s trading multiple advantage (buyer multiple prem
Slide 39: BPFH's value in parts is greater than current consideration
We estimate that BPFH’s value in parts is significantly greater than the current consideration Key Assumptions Private Bank • Private bank valuation based on branch deposit BPFH Deposits $8,595 premium (3.5%) Median Deposit Premium 3.5% • Wealth management valuation based on pre-tax Deposit Premium
Slide 40: Standalone value higher after cutting costs and buying back stock
BPFH’s standalone value would be higher than the Merger consideration after cutting costs and buying back stock • In the analysis below, we adjust BPFH’s standalone projected EPS for (1) a cost reduction to bring the Company’s expense base in line with peers and (2) a $115M share buyback at an assum
Slide 41: A reversion in SVB's valuation would be disastrous for BPFH shareholders
A reversion in SVB’s valuation to recent normalized levels would be disastrous for BPFH shareholders • SVB currently trades at 21.9x NTM EPS, nearly double its median 2019 multiple of 11.3x • We have seen no evidence from BPFH or its advisors to justify such a stratospherically high multiple • On th
Slide 42: Reversion could occur if volatile income streams disappear
A reversion in SVB’s valuation could occur if “volatile” income streams disappear • We believe SVB’s recent earnings are substantially inflated due to an unsustainable acceleration of: 1• Gains on investment securities and 2• Gains on equity warrant assets • Even SVB admits in their own filings that
Slide 43: Morgan Stanley's fairness opinion indicates SVB is nearly 60% overvalued
Even Morgan Stanley’s fairness opinion for BPFH indicates that SVB is nearly 60% overvalued In its fairness opinion, Morgan Stanley’s trading comparables analysis inexplicably utilizes a multiple range to value SVB that is meaningfully higher than even the top quartile of its peer group • If we appl
Slide 44: Industry experts share our view that the Merger is a steal for SVB
Industry experts appear to share our view that the Merger is a steal for SVB “Congratulations on using your currency, and it's good to see a bank do a deal for growth reasons.” “To us, the relatively low terminal price tag of 1.15x TBV for BPFH suggests that SIVB did well for its - BofA Merrill Lync
Slide 45: Valuation doesn't sync with SVB executives' praise for BPFH
The bargain basement valuation doesn’t sync with SVB executives’ high praise for BPFH and the Transaction Comments by SVB Executives on 1/4/2021 Conference Call to Discuss the Transaction: “[Boston Private is] a premier private banking and wealth management firm with outstanding Net Promoter Scores
Slide 46: III. A Better Path Forward for BPFH
III. A BETTER PATH FORWARD FOR BPFH 45
Slide 47: Steps to achieving enhanced value at BPFH are simple
In our view, the steps to achieving enhanced value at BPFH are simple and straightforward Shareholders vote down ▪ Requires two-thirds Merger shareholder approval SVB increases consideration to ▪ We believe SVB can pay $20+ per acceptable level share (see pages 34-38) If not, shareholders ▪ HoldCo h
Slide 48: BPFH can generate more value in a competitive sales process
HoldCo believes BPFH can generate significantly more value in a well-run, competitive sales process ✓ In our view, BPFH’s sale to SVB deprives shareholders of true price discovery that can only be achieved through a comprehensive and competitive process involving all logical buyers ✓ We believe this
Slide 49: HoldCo has nominated a slate of highly qualified nominees
HoldCo has nominated a slate of highly qualified nominees for election to the Board at the 2021 Annual Meeting Jeita L. Deng Ms. Deng brings important financial, budgetary and government expertise. She previously Associate Dean and Chief Financial served in several positions for the House Committee
Slide 50: BPFH shareholders deserve better
We believe BPFH shareholders deserve better Better Process Better Valuation Better Board PLEASE VISIT US AT www.BPValue.com TO LEARN MORE ABOUT OUR CAMPAIGN 49
Boston Private Financial Holdings — Proxy Contest (March 2021) on 6ix