Shares of Dallas-based bank Hilltop Holdings (HTH 0.62%) had shot up roughly 17.7% at 10:18 a.m. ET today after the company announced a modified Dutch auction tender offer to repurchase shares.
In the offering, Hilltop plans to purchase up to $400 million of common stock at a price between $28 and $32 per share. On Friday, April 29, Hilltop's stock closed at $25.49.
If the offering is fully subscribed, Hilltop will repurchase between 12.5 million and 14.28 million shares, which equates to between roughly 15.7% and 18% of Hilltop's common stock. None of Hilltop's directors or executives plan to tender any of their shares in offering.
In a modified Dutch auction tender offer, investors are essentially given a price range in which they are able to tender or sell their shares. Investors will specify how many shares they wish to sell and at what price, and then Hilltop will calculate the lowest price within the range at which they are able to buy those shares back from investors. Typically, there is a nice premium offered in the deal.
With the deal, investors are able to sell shares for a premium. With Hilltop's current book value per share around $31 at the end of the first quarter of 2022, Hilltop will have a good opportunity to repurchase stock below book value, which will result in the bank growing book value by decreasing the number of outstanding common shares.
With a large mortgage business, Hilltop will likely face pressure this year, but this Dutch auction tender offer is certainly a shareholder-friendly move.