Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Hanmi Financial (NASDAQ:HAFC) soared 10% today after the Korean-American bank agreed to acquire Central Bancorp, parent company of Texas-based United Central Bank, for $50 million in cash.
So what: Hanmi expects the transaction to be immediately accretive to its 2014 earnings and significantly accretive to 2015 earnings, and to generate an internal rate of return of more than 20% for shareholders. More important, the $50 million purchase price represents just 62% of Central Bancorp's tangible book value, suggesting Hanmi is making a particularly shrewd move.
Now what: The transaction is expected to close in the second half of 2014. "We believe the combined entity will be a significant competitive force in our markets and position the company for meaningful growth and earnings expansion," said Hanmi President and CEO C. G. Kum in a press release. "For shareholders, the combination is an attractive use of Hanmi's capital and is expected to be immediately accretive to earnings with minimal dilution to tangible book value per share, and will increase the earnings and growth profile of the combined entity."
With the Hanmi now up a whopping 70% from its 52-week lows and trading at a price-to-book premium to the industry, however, I'd wait for a wider margin of safety in case the integration doesn't go as smoothly as management expects.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.