On Monday, Evercore ISI reiterated its In Line rating on Hawaiian Electric (NYSE:HE) with a steady price target of $16.00. The firm's assessment follows reports that Central Pacific Financial (NYSE:CPF) is in discussions to purchase Hawaiian Electric's subsidiary, American Savings Bank (ASB).
Hawaiian Electric had previously disclosed in its second quarter 2024 earnings release that it was exploring strategic alternatives for ASB, leading to a pre-tax goodwill impairment of $82 million. This adjustment eliminated all goodwill from ASB's balance sheet, which in the first quarter of 2024 stood at $542 million in shareholder's equity, down from a prior valuation of $624 million for the bank.
The potential sale of ASB is estimated to bring in approximately $400-540 million for Hawaiian Electric. The company has signaled a valuation of ASB at a maximum of $542 million following the full goodwill impairment. An agreement between Hawaiian Electric and Central Pacific could be announced in the coming weeks, although it is noted that the discussions could still fail to result in a deal. Central Pacific, the fourth-largest bank in Hawaii by deposits, is reportedly seeking to raise $1 billion from investors such as Warburg Pincus, Centerbridge Partners, and Atlas (NYSE:ATCO) Merchant Capital to finance the acquisition. This fundraising is necessary as Central Pacific needs to cover unrealized losses in its securities book, which must be recognized upon the bank's change of ownership.
"Investors have been concerned that the ongoing court processes and an uncertain settlement outcome could present an overhang that would make access to capital more difficult than it otherwise would be. In our conversations with HE, the company has indicated that it is confident it will be able to raise the $1.7 billion in time," the analysts said.
InvestingPro Insights
As the discussions between Hawaiian Electric and Central Pacific Financial unfold, it is worth noting some key InvestingPro insights that could influence investor perspectives on Central Pacific Financial. According to recent data, Central Pacific Financial has a market capitalization of $752.1 million and is trading with a P/E ratio of 12.88, which is relatively close to its adjusted P/E ratio for the last twelve months as of Q2 2024, at 12.82. This suggests that the company's earnings relative to its share price are stable.
Importantly, Central Pacific Financial has shown a robust financial performance with a significant price uptick over the last six months, as indicated by a 47.39% return. This momentum is further underscored by a strong return of 69.64% over the past year, positioning the company near its 52-week high with its price at 97.04% of this peak. These figures exemplify the company's recent growth trajectory and could be a positive signal for potential investors.
Moreover, Central Pacific Financial has maintained dividend payments for 12 consecutive years, which may offer a degree of reassurance regarding the company's commitment to shareholder returns. The current dividend yield stands at 3.86%, with the last dividend having an ex-date of August 30, 2024.
InvestingPro Tips highlight that while Central Pacific suffers from weak gross profit margins, analysts have revised their earnings upwards for the upcoming period and predict the company will be profitable this year, which could be a crucial factor for investors considering the potential acquisition of American Savings Bank. There are numerous additional InvestingPro Tips available for those interested in a deeper analysis of Central Pacific Financial's outlook (https://www.investing.com/pro/CPF).
These insights could be particularly relevant to investors monitoring the potential acquisition's impact on both Hawaiian Electric and Central Pacific Financial, as well as the broader financial strategies of the companies involved.
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