Follow Up On Blue Harbor And Investors Bancorp

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Follow Up On Blue Harbor And Investors Bancorp by Activist Stocks

As a follow up to a “story” item from the daily newsletter, replicated below:

There’s a flood of ejaculatory exuberance over the touting of Investors Bancorp by Cliff Robbins of Blue Harbour Group. You’ve got my grandmother falling all over herself because the adorable Clifford Robbins has gone “active” on Investors Bancorp…CNBC notes, “Blue Harbour owns 7.8 percent of the stock, which is a new position and was publicly disclosed for the first time Monday” …due diligence, where art thou? It’s not that hard…Blue Harbour has been active at Investors Bancorp since August and upped its stake in January.

Previous notes and primer on the Investor Bancorp story is below:

Investors Bancorp is a holding company for Investors Bank, which is a New Jersey bank. It does all the things you’d expect from a small local bank, including deposit accounts and residential loans. The bank completed its IPO in 2005 and has been growing nicely since then. It never really got caught up in the credit writedowns related to the financial crisis.

Investors Bancorp recently underwent a plan to convert its structure. This involved a reorganization into a new fully public holding company…Investors Bancorp’s parent company was a mutual holding company known as Investors Bancorp MHC. Effectively, it was a two-tier holding company (60/40 split between the mutual holding company and public shareholders), but after the restructuring, shareholders own all of the bank holding company. This is commonly called a demutualization.

Recall that famed value investor Seth Klarman profiles demutualizations in his Margin of Safety book. The move makes the company’s shares more liquid, but it also reduces a lot of the complexities that might have been preventing some investors from owning the stock. It also increases the flexibility when it comes to raising capital to fund growth.

Also, as part of the deal, the bank raised capital which it plans to use to buy up short-term investments. With the bank already well capitalized, Blue Harbour may well be looking for a say in how Investors Bancorp uses that capital.

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