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Analysts see various reasons why EverBank may sell

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Analysts see various reasons why EverBank may sell

Jacksonville, Fla.-based EverBankFinancial Corp jumped 13.29% to $17.56 by close of business on Monday,July 25, amid rumors that the company is exploring a sale.

Bloomberg News reportedthat EverBank has been considering the possibility of selling after receiving anunsolicited offer, citing "people familiar with the matter." Followingthe report, analysts saw various reasons why the company might explore a sale.

Piper Jaffray analyst Peyton Green estimated that the company'sprivate equity ownership is approximately 22%. He also highlighted that a 4.6% stakein the company is owned by Robert Clements, chairman and CEO, and William Wilson,president and COO. And even though, the company has actively made acquisitions andmanaged to grow organically since its initialpublic offering in 2012, he thinks that now could be a good time tosell, given the current low-rate and strong credit quality environment.

"There may be a limited number of buyers given [EverBank]'sbusiness mix of internet banking, [commercial real estate] lending, jumbo mortgage,mortgage warehouse and specialty finance. However, given the excess capitalizationand asset growth starved state of the banking system (particularly for larger operators),we understand why [EverBank] was reportedly approached by an interested buyer,"Green wrote in his research report. The analyst is currently maintaining the companyat "overweight" with a 12-month price target of $17, but believes thatthe company would be worth $19.75 per share to $24.91 per share in a sale.

Evercore ISI analyst Steve Moss thinks that the news of a potentialsale means that the company is facing increased earnings headwinds. He noted thatthe company's net interest margin has decreased 28 basis points over the past yearand he thinks that given recent declines in long-term rates, the company might faceadditional NIM pressure in coming quarters.

He added that EverBank might find fewer potential buyers, consideringits assets size, and a bidding war might not happen. However, the company mightbe attractive to a "foreign buyer seeking a greater US presence, or a U.S.bank that is seeking to grow assets," as it operates a national mortgage andcommercial real estate platform.

The analyst maintained his "hold" rating on the stockand $16 price target. He calculated that recent large deals, where the seller hadmore than $5 billion in assets, had a median value of 1.7x tangible book value and19.4x last-12-months earnings. In the case of EverBank, he thinks that the company'svaluation range might vary significantly, but the deal might value somewhere between13.7x to 23.0x last-12-months earnings and 1.00x to 2.72x tangible book value.

Compass Point Research & Trading LLC analyst Jesus Buenonoted that EverBank's acquisition will make the third biggest deal since 2013 byassets size. The three largest deals include Royal Bank of Canada's acquisition of CityNational Corp., M&TBank Corp.'s acquisitionof Hudson City Bancorp Inc.,and KeyCorp's pending of

He thinks that the company can fetch between $17 per share to$22 per share in a sale, implying a core deposit premium range of 4% to 9%. "Giventhe bank's exposure to mortgage originations/servicing, in conjunction with itsinternet based deposit base, we expect that EVER would receive a discount to thehigh end of that range," Bueno added.

Bueno currently rates the company at "buy" with a 12-monthprice target of $16.50.