Monday, January 15, 2007

Hit #139 (Placer Sierra)

Placer Sierra Bancshares (PLSB) is being acquired by Wells Fargo in a stock-swap valuing Placer Sierra at around $645 million. The actual formula being used for the swap is dependent on Wells Fargo share price over a few days, but it comes to around $28/share, a premium of 18.94% over my average cost per share of $23.54.

It may look like Placer sold itself short, but looking deeper at the fast deflating real-estate bubble in Placer and Yolo counties, Placer seems to have timed this well. Wells could have waited for a better price, but given its size any price difference would have been largely immaterial. This gives Wells a much needed entry point into counties which will grow over the next few decades.

Given the premium I will be receiving, I intend to hold onto the Wells shares I get for a long time to come, as the effective yield is juicy.

I have posted frequently on banks which have featured prominently on my hit list in the past. Vineyard National Bancorp (VNBC), which I have mentioned recently, still looks attractive, and I have added to my position. I have also opened a small position in Severn Bancorp (SVBI). Virginia Commerce Bancorp (VCBI) is increasingly looking like a bargain given its takeover potential.

Previous hit - Intralase (#138)


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