We’re hearing that Westbridge Structured Mortgage Credit Corp. (Westbridge) is set to publicly announce a formal offer to take over CFF Bank. A press release is reportedly going out later today.
The move follows a CFF shareholder vote last week that was in favour of moving forward with rival Home Capital’s bid. Interestingly, that “yes” vote is actually a good thing for Westbridge (and shareholders) because a “no” vote could have triggered intervention by the banking regulator OSFI. That’s because CFF reportedly has limited operating capital left and OSFI is not in the business of letting banks fail.
Here are the next steps with Westbridge’s offer, as we understand them:
CFF’s board must now give due consideration to this competing offer, for the benefit of shareholders.
Westbridge must finish its due diligence on CFF.
The regulator must be made comfortable with Westbridge’s business plan.
Shareholders must judge the merits of Westbridge’s offer vis-à-vis Home Capital’s.
We’ll update this story with more details as they become available.
Update 1: Westbridge issued a press release this afternoon announcing its bid for CFF and stating the following:
“This strategic investment will enhance both entities’ competitive positions, further their market expansion plans while providing adequate capital for the Bank to meet and exceed regulatory capital requirements.
Westbridge’s investment envisions a differentiated lending strategy that focuses on under-served segments in commercial and residential mortgage lending space.
The Company’s team includes several individuals who have set up, operated and managed deposit-taking financial institutions before and who are very familiar with regulatory requirements and approval processes.
The offer being presented to the Bank’s Board of Directors today includes a $12-million initial capital injection and would see existing shareholders maintain a majority stake in the bank. It is a proposal that ensures the Bank meets its regulatory requirements, remains in operation and rewards its shareholders, debenture holders and employees over the proposed investment horizon.
The 2-year turnaround plan to be implemented by the Westbridge Executive team will enhance value far beyond the current alternatives available to the Bank’s current shareholders.
JD Diabira, Chief Executive Officer of Westbridge, notes, “Our value proposition takes into account the requirements of shareholders, debenture holders, regulatory agencies as well as that of the current CFF Centres.”
When asked about the competing bid from Home Trust, Mr. James Clayton, the Chairman of Westbridge responded: “Our proposed investment is designed to help avoid a lengthy proxy battle that may erode the Bank’s capital base and shareholder value. It is in shareholders’ best interest that the Board of Directors gives serious consideration to it. Ours provides both a higher valuation and superior returns in the coming years. We believe the CFF shareholders will respond favourably.”
Update 2: Home Capital CEO Gerald Soloway is “highly confident” his company’s offer for CFF Bank will close. That story from MBN.