Wednesday, August 03, 2005

Hit #57

E-loan (EELN) is being acquired by Popular (BPOP) for $300 million. This cash offer, of $4.25/share, is a 25% premium over my cost/share of $3.39.

E-loan is an online lender. It's CEO, Chris Larsen, is more well-known than the company. He has been a fierce supporter of online-privacy laws and a prominent Democrat.

I was expecting E-loan to be acquired by someone like Interactive Corp or Cendant. Popular is the largest bank in Puerto Rico, with also a good share of the Hispanic market in California and Florida. This does seem like a wise acquisition for Popular and will expand its customer base beyond its traditional market.

On a related topic, Puerto Rican financial institutions have taken a hit this past few months and I think a shakeout is imminent. Popular being the largest will most likely be a buyer, though European (mainly British and Spanish) and mainland-US banks (Bank of America, Citigroup, Wells Fargo and Washington Mutual) may still be eyeing Popular.

The lesser known players like Doral (DRL), Oriental Financial (OFG), RG Financial (RGF), First Bancorp (FBP) and Euro Bancshares (EUBK) are targets in this coming shakeout. Some of these are 60-70% off their recent highs and they all have yields in the 2% - 5% range. Doral is the best bet and I think it is massively undervalued now. The others are more speculative in nature.

Popular itself is a stable, value buy for long-term holders.

I own Popular and Doral shares.

Previous hit - Ivax (#56)


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