Activist Pushes for BNCCorp. to Sell

Value investor Rangeley Capital LLC is calling for one of the companies it has a 6% stake in to sell.

The company's partner Chris DeMuth Jr. issued a letter Monday, Oct. 31, urging BNCCORP (BNCC) , the holding company of BNC National Bank, to sell.

"While we believe the likely outcome of any strategic evaluation would be the sale of BNCC to a strategic buyer for a significant premium, we remain open to any outcome provided all options are explored with a goal of maximizing long-term shareholder value," DeMuth wrote in his letter.

Demuth said that BNC could fetch a purchase price of $35 per share, or $115 million based on shares outstanding. He said by phone that while Rangeley has potential buyers in mind for BNC, he could not share them with the public.

Perhaps Toronto-Dominion Bank would make sense as a buyer. The company has previously expressed interest in community banks, and BNC's location - Bismarck, N.D., could be an attractive way for TD to expand.

According to DeMuth, BNC has done well for itself in the current low interest rate regulatory environment. However, this environment is threatened, with a potential rate hike likely coming before the year's end.

DeMuth said by phone that if interest rates rise, it would be an opportune time for BNC to sell itself. The company has some "operational inefficiencies" DeMuth wrote, that it needs to address.

BNC has yet to issue a public response, and its marketing team could not be reached by phone for comment Tuesday.

"We have communicated these concerns to both management and the board several times, and we would have preferred to keep both the communications and our concerns private," DeMuth wrote in his letter.

At present, Rangeley is pushing the company to run a strategic review process, and to appoint a new director to its board. The director would have a major holding in the company, and would help oversee the process.

Rangeley's hope is that by issuing this letter, more shareholders can communicate to BNC a desire for the company to consider a sale.

"While we would continue to prefer to work constructively with the current board and management, our significant shareholdings demand that we act like good owners and continue to review all options for maximizing the bank's value, including running an alternative slate of directors at the next annual meeting," DeMuth wrote in his letter to the company. He added that shareholders can write to the company seeking a sale.

Rangeley has experience in bank mergers. The company was a major shareholder in OBA Financial before F.N.B. Corp. (FNB) bought the company for $94 million in 2013.

BNC has not been very active in the M&A space as of late. The company's most recent transaction was $17 million in PIPE priced at a 63% discount, which it used to pay dividends back in 2012.

BNC, which has a market cap of $72.49 million, saw a 1.6% jump in share price Tuesday, hitting $22 per share. The company could not be reached for immediate comment on a potential deal.

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