BOSTON, Oct 17
Activist investor Holdco Asset Management has taken a significant stake in Eastern Bancshares (EBC.O), as the well-known Boston financial institution is leaning towards putting itself up for sale rather than pursuing further acquisitions. This shift comes amidst discussions with stakeholders who have expressed their views on the matter.
Holdco has recently acquired a 3% stake in Eastern and is likely advocating for a sale to its larger neighbor, M&T Bank (MTB.N). Additionally, Holdco is urging Eastern’s management to reconsider its “inadequate capital allocation” strategy, which has involved multiple acquisitions and restructurings over the past five years, according to sources familiar with the situation.
It appears that Holdco argues these acquisitions have depleted nearly all the excess capital Eastern gained from its 2020 IPO, which raised $1.8 billion and marked its transition from a mutual bank established in 1818 to a publicly traded entity.
Criticism has been directed at Eastern’s previous leadership, particularly Robert Rivers, the former CEO and chairman, as Holdco points out a pattern of aggressive acquisitions without the necessary expertise in the realm of banking takeovers.
Following reports about Holdco’s investment strategy, shares of Eastern climbed to $18.17, reflecting a 5.52% increase. In contrast, the wider KBW Bank Index saw a slight uptick of less than 1% that day.
Responses from Eastern and Rivers regarding these developments were not available.
Holdco, based in Fort Lauderdale, Florida, manages around $2.6 billion in assets. While the hedge fund is open to discussions with Eastern’s management, it won’t shy away from increasing pressure, including potentially launching a proxy fight to alter the board’s composition.
Currently, Eastern, with a market value of $3.8 billion, has 15 directors, five of whom plan to run for reelection in 2026. Notably, Rivers was made executive chairman last year.
In a statement, company founders Vic Gay and Mischa Zaitsev emphasized their desire for a consensual resolution, but clarified that a proxy fight remains an option. Zaitsev also serves on the board of Berkshire Hills Bancorp, a role obtained through a prior settlement with a hedge fund.
In a broader context, Holdco’s focus on Eastern comes shortly after Fifth Third’s involvement in substantial deals, aiming to pressure Comerica into a sale, a tactic that’s been ramped up recently.
Analysts predict that while bank mergers often face rigorous regulatory scrutiny, an uptick in activity may be forthcoming, especially with expectations of a friendlier environment under the Trump administration compared to the previous one.
Eastern Bank stands as one of Boston’s top regional banks, operating over 100 branches across multiple states, and maintaining a loyal customer base of small businesses and individual clients. Analysts believe its low deposit costs make it an attractive option for larger banks.
Despite Eastern’s claims that its acquisitions have bolstered its position in asset management, increasing its assets from $12 billion in 2019 to an expected $30 billion, Holdco argues the opposite. They contend these maneuvers have ultimately harmed shareholders, suggesting that a more conservative approach would have been beneficial.
Holdco highlights that had Eastern avoided aggressive acquisitions and restructuring activities, it could have yielded a significant excess capital per share, ultimately suggesting that shareholders might as well own the bank for free with a special dividend today.
While Holdco has voiced concerns over Rivers’ direction, he wields considerable influence in Boston, being ranked by Boston Magazine as one of the most influential figures in the area.
