Hawaiian Electric Industries, Inc.’s (HE) plan to spin off ASB Hawaii Inc. into an independent publicly traded company was approved by its board of directors. Honolulu-based ASB Hawaii Inc. is the parent company of American Savings Bank (:ASB).
The transaction is subject to the closure of a separate deal announced between Hawaiian Electric Industries or HEI and NextEra Energy, Inc. (NEE) under which the latter will acquire Hawaiian Electric Industries for $4.3 billion.
Post spin-off, ASB, which is regarded as the state's third largest bank, will continue to be based out of Hawaii and retain its name and corporate distinctiveness. ASB provides a wide array of banking services. American Savings Bank has over $5 billion in assets, more than $4 billion in deposits, 56 branches and 1,200 employees.
Terms of the Spin-off
Per the proposed spin-off, HEI shareholders will get a distribution of stock in ASB Hawaii, pro rata to their ownership interest in HEI. NextEra Energy will assume the corporate tax liability to a total of about $1.60 per HEI share related to the spin-off, while it is expected to be tax-free for HEI shareholders.
ASB Hawaii's estimated current value is approximately $800 million, or approximately $8 per share, based on the median of six equity analyst consensus estimates. The valuation represents 1.7-1.8-times tangible book value for the bank.
Post spin-off, ASB expects to see higher fee income on an annualized basis owing to regaining its exemption from regulatory limits on interchange fees from the Durbin Amendment. Prior to losing the Durbin Amendment exemption, in 2013, ASB earned approximately $6 million, after tax, in higher interchange fees. Post spin-off, ASB will regain the exemption.
We remind investors that Hawaiian Electric’s banking segment registered revenues of $63.5 million in the third quarter 2014, down 2.3% year over year. The segment recorded a net income of $13.3 million in the reported quarter, down 13.2% from $15.3 million in the year-ago quarter. The year-over-year decline was due to lower fee income on other financial products, lower mortgage banking income and higher provision for loan losses.
Following the completion of the deal, ASB will join Bank of Hawaii, Central Pacific Bank as well as Territorial Savings Bank as Hawaii's very own publicly traded banks.
Zacks Rank
Hawaiian Electric currently holds a Zacks Rank #2 (Buy). Better-ranked stocks in the same sector include Black Hills Corp. (BKH) and PG&E Corp. (PCG), both carrying a Zacks Ranks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment