Coastway Bancorp Inc. began exploring different strategies to increase shareholder value, including potential acquisitions of other financial institutions, after the three-year merger prohibition following its conversion to a stock company expired in January 2017.
Throughout 2017, the Warwick, R.I.-based company would receive calls from several financial companies interested in pursuing a deal. One party in particular, Company A, had expressed continued interest in Coastway. Company A, which had indicated that any potential merger consideration would be 100% cash, submitted a nonbinding indication of interest for Coastway in October 2017. The indication of interest did not provide any specific information regarding pricing.
Company A submitted a revised nonbinding indication of interest on Jan. 2, offering to acquire Coastway for a fixed amount of cash priced between $25.00 and $26.50 for each common share held. To gauge the competitiveness of the offer, Coastway instructed its financial adviser, Sandler O'Neill & Partners LP, to reach out to five other companies, including Brockton, Mass.-based HarborOne Bancorp Inc (MHC).
Of the five, two made offers. HarborOne proposed an all-cash deal with a purchase price of between $27.50 and $29.00 per share and Company B proposed a cash-and-stock deal at $25.50 per share.
The board decided not to pursue Company B's offer as it was lower than Company A's and HarborOne's offers. The board authorized Sandler O'Neill to contact Company A and ask if it will increase its offer. The CEO of Company A expressed the party's willingness to increase the offer but said that it will not be within the price range guidance offered by Sandler O'Neill.
On Jan. 18, Company A declined to further increase its proposed purchase price and said it will no longer pursue a transaction. However, it expressed continued interest in Coastway if it does not pursue another deal.
The next day, Coastway and HarborOne executed a nondisclosure agreement to proceed with their due diligence investigations. On Feb. 15, following discussions, HarborOne revised its proposal to pay $28.25 per Coastway share.
The discussions went on for another month and on March 14, the two companies executed their merger agreement. The deal was announced after markets closed that day.