Concerned Shareholder Shaul Kopelowitz Issues Open Letter Regarding Opposition to Pacific Enterprise Bancorp’s Merger with Baycom Corp

NEW YORK--(BUSINESS WIRE)-- Shaul Kopelowitz, who holds approximately 9.9% of the outstanding common shares of Pacific Enterprise Bancorp (OTC: PEBN), today issued the below open letter to shareholders. Mr. Kopelowitz has also submitted an application to the Federal Reserve for a non-objection to acquire additional PEBN shares.

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Fellow Shareholders,

I am one of the largest shareholders of Pacific Enterprise Bancorp (“PEBN” or the "Company”), with shareholdings of approximately 9.9%. I am writing to you today regarding my strong opposition to the Company’s proposed merger with BayCom Corp (“BCML”).

In my view, the Board of Directors (the “Board”) approved an ill-conceived and strategically flawed merger agreement last year. At the time of the announcement, the proposed merger short-changed shareholders by $3.30 per share in book value.¹

It appears that no non-distressed California bank since the Great Recession has sold for less than book value.² In fact, the average premium for a regional bank merger or acquisition over the last five years is 173.25% of tangible book value.³ This leads me to question whether the Board fulfilled its fiduciary duties and ran a proper market test before entering into this seemingly value-destructive deal. In conversations with other industry participants, I have heard that other potential acquirors were not even given a proper chance to participate in the bid process.

Management has naturally argued that the combination with BCML, while at a discount, is still better in the long run for shareholders. In my opinion, this is a baseless and exceedingly pessimistic view of PEBN and an overly optimistic estimation of BCML's potential to create value for shareholders. BCML has underperformed the benchmark industry ETF by 18% and 50% over the last one- and two-year time horizons, respectively.⁴ Additionally, while banking sector indices and ETFs are hitting all-time highs, BCML’s share price peaked years ago in 2018.⁵ Yet, BCML’s chief executive officer’s compensation has increased more than 54% over that time period.⁶

The reality is the aforementioned metrics do not match the rosy picture painted by management when advocating for the merger. As the classic Wall Street adage goes: Tying two rocks together will not make them float. The solution for a bank trading at a discount to book value is not to merge it with another bank that is also trading at a discount to book value.

If this merger was truly market-tested and BCML’s offer was actually the best available, I question why the Board decided to ultimately move forward. In my opinion, this is a transaction that does nothing for shareholders – other than deprive them of value. I firmly believe there are superior alternatives available that do not subject shareholders to a punishing discount, including liquidating the Company’s assets and returning the equity to shareholders.

I am voting against the proposed merger and cannot see how any other shareholder could reach a different conclusion. I welcome the opportunity to engage with fellow shareholders and explain my opposition to the deal. I also welcome the chance to speak with the Board about value-enhancing alternatives once this deal is hopefully voted down.

Sincerely,

Shaul Kopelowitz

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¹ Based on $21.08 in Book Value on the same date, available at https://www.pacificenterprisebank.com/home/fiFiles/static/documents/Disclosure%20statement%20093021.pdf.
² S&P Global Market Intelligence.
³ S&P Global Market Intelligence.
⁴ Total shareholder return for BCML and SPDR S&P Regional Banking ETF calculated as of the close on December 7, 2021.
⁵ August 26, 2018 closing price of $26.68, as reported by Nasdaq.
⁶ Based on reported total compensation of $1,444,511, $1,999,940, and $2,226,361 in 2018, 2019 and 2020, respectively.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211208005590/en/

MKA

Greg Marose / Bela Kirpalani, 646-386-0091

gmarose@mkacomms.com / bkirpalani@mkacomms.com

 

Source: MKA Communications on behalf of Shaul Kopelowitz