Alexander & Baldwin Alexander & Baldwin Inc. this month completed the sale of every share it owns in the parent company of Bank of Hawaii, taking an after-tax profit of $9.4 million, according to A&B's recent first-quarter report.
sells its shares in
two Hawaii banks
A&B held the shares for decades
and will profit substantiallyBy Tim Ruel
Star-Bulletin
Beginning in April, Honolulu-based A&B sold 749,000 shares in Pacific Century Financial Corp., worth a total of $16.2 million before taxes, or an average of $21.63 a share. A&B will factor the gain into its second-quarter earnings.
Earlier this year, A&B also donated 360,000 shares in Pacific Century, worth $7.5 million, to its charitable Alexander & Baldwin Foundation. The shares cost approximately $500,000, an expense that was included in A&B's first-quarter earnings.
A&B, founded in 1870, acquired the shares decades ago as part of its loan relationship with Bank of Hawaii.
"I've been with the company 20 years, and (the shares) were long in the portfolio before I joined," said John B. Kelley, vice president of corporate planning and investor relations at A&B.
The sale of shares occurred around the time of Pacific Century's April 23 announcement that it will shed most of its operations outside Hawaii, cut its payroll by more than 1,000 employees and reduce assets to $9 billion from $14 billion.
Kelley said the announcement marked a significant point in the strength of Pacific Century's stock, which has undergone a major recovery in the past six months.
The stock lost more than half its value between June 2 and Oct. 27 last year, beginning with the revelation that bad loans would wipe out most of Pacific Century's profits for the second quarter of 2000. Over four months, the stock fell from $22.94 a share to $11.25, its lowest close since Feb. 27, 1991.
On Nov. 3, Pacific Century announced it had hired a new chairman and chief executive officer, Michael E. O'Neill, who played a key role in the 1997 sale of Bank of America Hawaii. On the following day of trading, the stock jumped 10 percent.
Pacific Century's stock, traded on the New York Stock Exchange, has since fully recovered from last year's declines and closed Thursday at $24.42, a two-year high.
The stock's renewed strength wasn't the only reason for the timing of the sale, Kelley noted. Wall Street was beginning to wonder why a shipping, farming and real estate company had so much investment in banking, he said.
"If a portfolio manager wants to buy a bank stock, they would buy a bank stock," Kelley said.
The divestiture of Pacific Century isn't A&B's only recent windfall from bank stocks.
The company stands to gain $68 million after taxes from a pending buyout of the Honolulu-based parent company of First Hawaiian Bank.
Earlier this month, Paris-based international investment banking firm BNP Paribas announced its bid to buy all the shares of BancWest Corp. that it doesn't already own, taking the company private. BNP, formerly known as Banque Nationale de Paris, has owned 45 percent of BancWest since November 1998.
BNP is offering $35 a share. A&B has 3.4 million shares in BancWest, which would be worth $119 million before taxes. The deal still requires the approval of regulators and BancWest's shareholders.
A&B picked up the BancWest stock over time for relatively low prices, the same way it acquired the stock in Pacific Century.
The two revelations marked a bright spot for an otherwise soft quarterly report for A&B. The company reported net income down 15 percent to $22.4 million from $26.4 million in the year-earlier period, despite a 19 percent increase in revenues. Per-share earnings fell to 55 cents a share from 63 cents. A&B cited an accounting change for causing the drop.
Meanwhile, A&B's stock has risen 11.4 percent in the past two weeks since the buyout offer for BancWest, and closed Friday at $24.11.