EXHIBIT 99.3
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED
PURSUANT TO § 240.13d-2(a)
Under the Securities Exchange Act of 1934
First United Corporation |
(Name of Issuer) |
Common Stock, par value $0.01 per share
(Title of Class of Securities)
33741H107
(CUSIP Number)
J. Abbott R. Cooper
Driver Management Company LLC
250 Park Avenue
7th Floor
New York, NY 10177
212-572-4811
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
August 28, 2019
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
| * | The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. 233237106 |
1 | NAME OF REPORTING PERSON
Driver Opportunity Partners I LP | ||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) x (b) ¨
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3 | SEC USE ONLY
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4 | SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC, OO | ||
5 | CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
¨ | ||
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | ||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
| 7 | SOLE VOTING POWER
360,637 | |
8 | SHARED VOTING POWER
0 | ||
9 | SOLE DISPOSITIVE POWER
360,637 | ||
10 | SHARED DISPOSITIVE POWER
0 | ||
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
360,637 | ||
12 | CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
¨ | ||
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.08%* | ||
14 | TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN | ||
______________
| * | The percentage calculations herein are based upon an aggregate of 7,105,775 shares of common stock, par value $0.01 per share, of First United Corporation outstanding as of July 31, 2019, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2019. |
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CUSIP No. 233237106 |
1 | NAME OF REPORTING PERSON
Driver Management Company LLC | ||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) x (b) ¨
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3 | SEC USE ONLY
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4 | SOURCE OF FUNDS (SEE INSTRUCTIONS)
Not Applicable | ||
5 | CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
¨ | ||
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | ||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
| 7 | SOLE VOTING POWER
360,637* | |
8 | SHARED VOTING POWER
0 | ||
9 | SOLE DISPOSITIVE POWER
360,637* | ||
10 | SHARED DISPOSITIVE POWER
0 | ||
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
360,637 | ||
12 | CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
¨ | ||
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.08%** | ||
14 | TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OOO (Limited Liability Company) | ||
______________
| * | Solely in its capacity as general partner of Driver Opportunity Partners I LP. Driver Management Company LLC disclaims beneficial ownership except to the extent of its pecuniary interest therein. |
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| ** | The percentage calculations herein are based upon an aggregate of 7,105,775 shares of common stock, par value $0.01 per share, of First United Corporation outstanding as of July 31, 2019, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2019. |
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CUSIP No. 233237106 |
1 | NAME OF REPORTING PERSON
J. Abbott R. Cooper | ||
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) x (b) ¨
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3 | SEC USE ONLY
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4 | SOURCE OF FUNDS (SEE INSTRUCTIONS)
Not Applicable | ||
5 | CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
¨ | ||
6 | CITIZENSHIP OR PLACE OF ORGANIZATION
United States | ||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
| 7 | SOLE VOTING POWER
360,637* | |
8 | SHARED VOTING POWER
0 | ||
9 | SOLE DISPOSITIVE POWER
360,637* | ||
10 | SHARED DISPOSITIVE POWER
0 | ||
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
360,637 | ||
12 | CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
¨ | ||
13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.08%** | ||
14 | TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN | ||
__________
| * | Mr. Cooper may be deemed to beneficially own and have shared voting and dispositive power over 360.637 shares of common stock as the controlling person of Driver Management Company LLC. Mr. Cooper disclaims beneficial ownership of any shares held by any of the Reporting Person except to the extent of his pecuniary interest therein. |
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| ** | The percentage calculations herein are based upon an aggregate of 7,105,775 shares of common stock, par value $0.01 per share, of First United Corporation outstanding as of July 31, 2019, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2019. |
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Item 1. Security and Issuer.
This statement on Schedule 13D (the “Schedule 13D”) relates to the common stock, $0.01 par value (the “Common Stock”), of First United Corporation, a Maryland corporation (“FUNC” or the “Issuer”). The principal executive offices of the Issuer are located at 19 South Second Street, Oakland, Maryland 21550-009.
Item 2. Identity and Background.
(a) The undersigned hereby file this Schedule 13D Statement on behalf of Driver Opportunity Partners I LP, a Delaware limited partnership (“Partnership”), “”Driver Management Company LLC, a Delaware limited liability company (“Driver”) and J. Abbott R. Cooper. Partnership, Driver and Mr. Cooper are sometimes referred to as the “Reporting Persons.” The Reporting Persons are making this single, joint filing because they may be deemed to constitute a “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Act”), although neither the fact of this filing nor anything contained herein shall be deemed to be an admission by the Reporting Persons that a group exists.
(b) — (c)
Partnership is a Delaware limited partnership, the principal purpose of which is investing in securities.
Driver is a Delaware limited liability company, the principal purpose of which is to be the general partner of Partnership and to manage certain other investments on behalf of separately managed accounts and other investment vehicles.
The principal occupation of Mr. Cooper is to serve as the managing member of Driver.
The principal place of business address of Partnership, Driver and Mr. Cooper is 250 Park Avenue, 7th Floor, New York, New York 10177.
(d) None of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Reporting Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
(f) All of the natural persons identified in this Item 2 are citizens of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration.
A portion of the Shares were acquired in exchange for newly issued equity interests in Partnership. The remaining Shares were purchased by Partnership in open market transactions using the capital of the Partnership. The aggregate purchase price of the Shares was $7,373,270.31.
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Item 4. Purpose of Transaction
The Reporting Persons purchased the Shares based on their belief that the Shares, when purchased, were trading at a significant discount to fair value and that the then current market price for the Common Stock did not fully reflect the value that might be obtained for the Shares in a sale of the Issuer to a larger banking organization.
Beginning in March 2019, the Reporting Persons have regularly communicated their views (publicly and to the Issuer) that the Issuer would be worth significantly more in a sale than as a stand-alone company and that the Issuer should immediately retain qualified and experienced financial advisors and initiate a sale process for the benefit of all shareholders. The Reporting Persons have informed the Issuer of their opinion that, among other things:
| · | The market price for the Common Stock does not reflect the true value of the Issuer’s deposit franchise or attractive wealth management and trust businesses due to the Issuer’s failure to attain acceptable levels of profitability, primarily driven by the Issuer’s inability to leverage its elevated operating expense base; |
| · | The Issuer lacks sufficient scale to support its elevated expense levels and is unlikely to attain such scale in its current markets in an acceptable timeframe without diluting its franchise value, particularly in the current economic environment of slowing growth and compressing margins; |
| · | Since listing on NASDAQ in 1992, the Issuer has failed to deliver acceptable shareholder returns compared to publicly traded banks of similar size and has consistently traded at a meaningful valuation discount to those banks and an even more significant discount to larger potential acquirers; |
| · | There are a number of banks that would be interested in acquiring the Issuer and that would be likely to pay a premium to the current market price of the Common Stock; and |
| · | The Issuer’s board of directors (the “Board”) have interests that conflict with those of shareholders generally, and such conflicts of interest stand in the way of the Board’s taking immediate and decisive steps to maximize value for all shareholders. |
As part of the Reporting Persons’ communications with the Issuer, Mr. Cooper has had telephone and in-person discussions with Carissa Rodeheaver, Chairman of the Board and Chief Executive Officer of the Issuer. On July 24, Mr. Cooper sent a letter (the “July 24 Letter”, a copy of which is attached hereto as exhibit 99.2) to Ms. Rodeheaver stating that Driver believed that the Issuer’s shareholders could receive $26-30 per share in a sale and requesting a meeting with the Board to present its analysis supporting that conclusion. On August 20, Mr. Cooper sent Ms. Rodeheaver a copy of a presentation (the “August 20 Presentation”, a redacted version of which is attached hereto as Exhibit 99.3) to be shared with the Board outlining (and supporting) the Reporting Persons’ belief that the Issuer could be valued between $26-33 per share in a sale and should immediately hire qualified and experienced financial advisors and commence a sale process.
On September 4, Mr. Cooper sent Ms. Rodeheaver a letter (the “September 4 Letter”, a copy of which is attached hereto as Exhibit 99.4) responding to an email message sent by Ms. Rodeheaver to Mr. Cooper regarding Mr. Cooper’s request to meet with the Board.
The Reporting Persons intend to continue to communicate with the Issuer regarding the Reporting Persons’ views on ways to maximize shareholder value and may from time to time in the future discuss these views with other shareholders and third parties.
No Reporting Person has any present plan or proposal that would relate to or result in any of the matters set forth in subparagraphs (a) – (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon or in connection with the completion of, or following any of the actions discussed herein. The Reporting Persons may consider, explore and/or develop plans or make proposals with respect to, or with respect to potential changes in, the operations, management, the articles and bylaws, Board composition, ownership, capital or corporate structure, capital allocation, dividend policy, strategy and plans of the Issuer, potential strategic transactions involving the Issuer or certain of the Issuer’s businesses or assets, or may change their intention with respect to any and all matters referred to in Item 4.
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Item 5. Interest in Securities of the Issuer.
(a) Unless otherwise indicated, percentage interest calculations for each Reporting Person are based upon the Issuer having 7,105,775 shares of Common Stock outstanding, as set forth in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2019.
Partnership
The aggregate number of shares of Common Stock that Partnership owns beneficially pursuant to Rule 13d-3 of the Act is 360,637 shares of Common Stock, which constitutes approximately 5.08% of the outstanding shares of Common Stock.
Driver
Because of its position as the general partner of Partnership, Driver may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 370,637 shares of Common Stock, which constitutes approximately 5.08% of the outstanding shares of Common Stock. Driver disclaims beneficial ownership of any shares owned by Partnership except to the extent of its pecuniary interest therein.
Mr. Cooper
As the controlling person of Driver, Mr. Cooper may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 360,637 shares of Common Stock, which constitutes approximately 5.08% of the outstanding shares of Common Stock. Mr. Cooper disclaims beneficial ownership of any shares of Common Stock held by Partnership except to the extent of his pecuniary interest therein.
(b) Partnership has the power to vote or direct the vote of, and to dispose or direct the disposition of the shares of Common Stock owned directly by it.
Driver, as the general partner of Partnership, has the power to vote or direct the vote of, and to dispose or direct the disposition of the shares of Common Stock owned directly by Partnership.
Mr. Cooper, as the controlling person of Driver, may be deemed to have sole power to vote or direct the vote of, and to dispose or direct the disposition of, the shares of Common Stock owned directly by Partnership. Information regarding Mr. Cooper is set forth in Item 2 of this Schedule 13D and is expressly incorporated by reference herein.
(c) The transactions effected by the Reporting Persons during the past 60 days are set forth on Schedule 1 attached hereto. Except as described in this Schedule 13D and Schedule I attached hereto, to the knowledge of any of the Reporting Persons, no other transactions in the Common Stock were effected by the Reporting Person or any of the entities or persons named in Item 2 hereto during the 60 days prior to the date of this Schedule 13D.
(d) To the knowledge of any of the Reporting Persons, no other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities reported in this Item 5.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.
On September 5, 2019, Partnership, Driver and Mr. Cooper entered into a Joint Filing Agreement (the “Joint Filing Agreement”) in which the parties agreed to the joint filing on behalf of each of them of statements on Schedule 13D with respect to the securities of the Issuer to the extent required by applicable law. The Joint Filing Agreement is attached as Exhibit 99.1 hereto and is incorporated herein by reference.
Except as described above in this Item 6, none of the Reporting Persons has any contracts, arrangements, understandings or relationships with respect to the securities of the Issuer.
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Item 7. Exhibits
Exhibit |
| Description |
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Schedule I |
| Transactions in Securities of the Issuers During the Past Sixty Days |
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SIGNATURE
After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: September 5, 2019
Driver Opportunity Partners I LP | |||
| By: | Driver Management Company LLC, its general partner | ||
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By: | /s/ J. Abbott R. Cooper | ||
Name: | J. Abbott R. Cooper | ||
| Title: | Managing Member |
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| Driver Management Company LLC |
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| By: | /s/ J. Abbott R. Cooper |
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| Name: | J. Abbott R. Cooper |
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| Title: | Managing Member |
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| By: | /s/ J. Abbott R. Cooper |
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| J. Abbott R. Cooper |
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SCHEDULE I
Transactions of the Reporting Persons Effected During the Past 60 Days
The following transactions were effected by Partnership in the Common Stock during the past 60 days. Unless otherwise noted, all transactions were made in the open market
Date of Transaction | Quantity Purchased/(Sold) | Average Purchase Price ($) |
7/24/19 | 1,378 | 19.929 |
7/31/19 | 5,000 | 21.54 |
8/1/19 | 104,000 | N/A—exchange for Partnership interests |
8/1/19 | 2,584 | 21.12 |
8/2/19 | 1,958 | 20.933 |
8/5/19 | 2,199 | 20.544 |
8/6/19 | 1,200 | 20.787 |
8/7/19 | 1,620 | 20.74 |
8/7/19 | 40,000 | 20.74 |
8/8/19 | 1,410 | 20.71 |
8/9/19 | 2,000 | 20.808 |
8/13/19 | 1,320 | 20.972 |
8/14/19 | 2,081 | 20.58 |
8/15/19 | 3,238 | 20.573 |
8/16/19 | 1,958 | 20.698 |
8/26/19 | 181,191 | 20.9856 |
8/26/19 | 2,500 | 21.429 |
8/30/19 | 5,000 | 21.55 |
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EXHIBIT 99.1
JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule 13D with respect to the Common Stock of First United Corporation dated September 5, 2019, and any further amendments thereto signed by each of the undersigned shall be, filed on behalf of each of the undersigned pursuant to and in accordance with the provisions of Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended.
Dated: September 5, 2019
Driver Opportunity Partners I LP | |||
| By: | Driver Management Company LLC, its general partner | ||
By: | /s/ J. Abbott R. Cooper | ||
Name: | J. Abbott R. Cooper | ||
Title: | Managing Member | ||
Driver Management Company LLC | |||
By: | /s/ J. Abbott R. Cooper | ||
Name: | J. Abbott R. Cooper | ||
Title: | Managing Member | ||
By: | /s/ J. Abbott R. Cooper | ||
J. Abbott R. Cooper | |||
EXHIBIT 99.2
Driver Management Company LLC
July 24, 2019
Ms. Carissa Rodeheaver
Chairman, President & CEOFirst United Corporation
19 South Second Street
Oakland, MD 21550
Dear Carissa:
By way of update, I had mentioned to you when we last spoke that investment vehicles that I manage were actively accumulating shares of First United stock. As of the date of this letter, those vehicles own over 100,000 shares of First United stock. I intend to continue purchasing additional shares as I believe First United represents a very attractive investment opportunity—an opportunity that others seem to have discovered as well.
But, as we’ve previously discussed, I believe that First United is worth far more in a sale than independent. Simply put, despite some recent improvements, First United’s core profitability continues to meaningfully lag peers, masking the value of its enviable deposit franchise and trust and wealth management businesses. While the public market is significantly discounting the value of these scarce assets, I believe that a number of other financial institutions have a far greater appreciation for the value of these assets and would appropriately value them (and the rest of First United’s business) in a sale.
The reasons for First United’s underperformance (and the large discrepancy between sale and market value) are readily apparent: First United lacks the scale to justify an elevated expense base and inefficient branch network and has been unable to create sufficient operating leverage due to lackluster organic loan growth. Considering the slower growth prospects in First United’s markets and the challenges facing similar banking organizations with sub-optimal scale, the standalone path to increasing shareholder value is lengthy, arduous and uncertain. On the other hand, a sale or merger with a larger financial institution would immediately rationalize First United’s expense base and unlock the value of its high-quality deposit franchise and attractive trust and wealth management businesses, resulting in an immediate increase in shareholder value with far less risk and uncertainty.
As such, the best way to maximize value for all First United shareholders would be to immediately engage qualified and experienced financial advisors and instruct them to run a sale process for First United. Other shareholders appear to share my view, including those shareholders that WITHHELD approximately 20% of the votes cast at First United’s 2019 annual meeting of shareholders in the absence of any competing board candidates.
Our in-person meeting in May and subsequent phone conversations regarding the future of First United were enlightening and informative. I believe the next step is to arrange a discussion with First United’s board of directors to present my analysis of the value that could be obtained for all First United shareholders in a sale of the company or merger with a larger financial institution. As of the date of this letter, Driver believes that First United could be valued between $26 and $30 per share in a thorough and well-run process. This represents a 30% to 50% premium to First United’s closing stock price as of July 24, 2019.
Please advise me—ideally by the end of July—of the time and place the First United board is available to meet. In the meantime, I encourage you to retain qualified and experienced financial advisors to evaluate the potential value that could be created for shareholders in a sale or combination with a larger institution. To assist the board and their advisors in their evaluation of potential sale value to standalone value, Driver will make available our valuation analysis prior to the meeting upon your request.
As discussed, I believe that First United has a clear opportunity to maximize value by pursuing a sale process, and I look forward to sharing my views with the board. Please do not hesitate to contact me at ac@drivermgmtco.com or by phone at 917-744-7758.
Sincerely,
/s/ Abbott Cooper
Abbott Cooper
Managing Member
Driver Management Company LLC
EXHIBIT 99.3
EXHIBIT 99.4
Driver Management Company LLC
September 4, 2019
Carissa L. Rodeheaver
Chairman of the Board, President & CEO
First United Corporation
19 South Second Street
Oakland, MD 21550
Dear Carissa:
Let’s review First United Corporation’s long-term performance:
· | First United’s shares have consistently traded at an average price-to-tangible book multiple discount of 35% relative to the snl u.s. bank $1b-$5b index.1 |
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· | During the last ten years, First United’s shares have traded at a discount to tangible book value over 70% of the time.2 |
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· | First United has achieved less than half the loan growth of regional and national peers over the past five years.3 |
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· | Non-interest expenses are 25%+ higher than national peers.4 |
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· | Eight of First United’s twelve directors have presided over this sustained underperformance for over a decade and the board’s average tenure is over 15 years.5 |
It seems obvious to us that the First United board of directors has completely and resolutely failed to deliver acceptable results to shareholders. It also seems obvious to us—and other shareholders (based on the results of your most recent annual meeting)—that the only way for the First United board to finally create value for its long-suffering shareholders is to immediately hire experienced and qualified financial advisors and start a sale process.
But just in case this wasn’t clear to you or the First United board, Driver Management Company LLC has spent a considerable amount of time over the past (close to) six months discussing this issue with you in an attempt to provide you with the perspective of any reasonable shareholder that invested in First United with the goal of seeing the value of their stock increase (as opposed to the First United board, whose interests—and perspective—are likely quite different from other shareholders given the benefits—monetary and otherwise—afforded to them by their position).
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1 S&P Global Market Intelligence (performance from 9/2/92, which is the date of the Company’s Nasdaq listing, to 3/25/19, the day before Driver first publicly called for FUNC to explore a sale ( http://www.sec.gov/Archives/edgar/data/763907/000147793219001166/dmc_px14a6g.htm)
2 S&P Global Market Intelligence
3 S&P Global Market Intelligence (data as of or for the quarter ended 6/30/19; national peers consist of publicly traded banks with assets between $1B and $3B).
4 S&P Global Market Intelligence (data as of or for the quarter ended 6/30/19; national peers consist of publicly traded banks with assets between $1B and $3B).
5 S&P Global Market Intelligence
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The presentation we provided to your board, and which we are making public tomorrow, highlighted the value that might be obtained by shareholders in a sale and the unlikelihood (given First United’s historical performance standards) of achieving similar value while pursuing a stand-alone path. Our analysis, shows, among other items, that First United would need to:6
| · | Increase its return on average assets by more than 70%—from approximately 0.73% to 1.25%—at its current size to achieve the same value we believe could be obtained in a merger or sale transaction. |
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| · | Increase its assets by more than 70%—from approximately $1.4B to $2.5B—at the current return on average assets to achieve the same value we believe could be obtained in a merger or sale transaction. |
As we’ve explained to you, we firmly believe that there is currently up to 50% of uncaptured value buried within First United’s underperforming shares. Our view is that the First United board should be completely focused on delivering that value to their long-neglected shareholders via an expedited, well-run sale process that Driver believes would result in a sale price between $26-$33 per share.7
In case you haven’t noticed, the market seems to agree with our view, given that First United’s stock has out meaningfully outperformed peers since March 25,8 the day before we first publicly called for First United to explore a sale. Absent any other possible catalyst for this (highly unusual) outperformance, we can only assume that the market is beginning to anticipate (and expect) that the First United board will finally take decisive action to increase shareholder value.
We had some hope that our discussions with you this summer would have resulted in the First United board using Driver’s analysis and recommendations to finally commence a sale process after years of stagnation. Based on the short e-mail you sent on September 2, however, we can only conclude that the Board remains comfortable continuing to ignore shareholders’ concerns and perpetuate First United’s dismal long-term performance.
It is simply unacceptable that the First United board is only now – after many wasted months – taking steps to perform “additional analyses regarding its current strategy and any potential alternatives to that strategy.”9 We recognize that the First United board’s entrenched directors likely prefer to defend the status quo that maintains their economic benefits and handsome perks, especially given their meager shareholdings and lack of alignment with shareholders. But considering (i) the analysis that Driver has been providing you for months and (ii) the fact that shareholders made their wide-ranging dissatisfaction known to the board when upwards of 30% of shares voted at the Company’s 2019 annual meeting were withheld from incumbent board candidates, it is shocking that the First United board appears to feel no urgency regarding the clear need to maximize value for First United shareholders.
We believe it is long past time for the First United board to take the following steps to fulfill its obligations to shareholders:
| 1. | Hire an established and experienced investment bank to run a thorough sale process designed to attract multiple potential acquirers; |
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| 2. | Establish a dedicated board committee, comprised of independent directors, to oversee the investment bank’s efforts and the review of strategic alternatives; and |
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3. | Provide all shareholders with an outlook on First United’s sale process timeline and commit to delivering periodic updates as appropriate. |
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6 Driver Management presentation entitled “Perspectives on First United,” 8/20/2019, attached as Exhibit 99.3 to Driver’s Schedule 13D filed on September 5, 2019.
7 Driver Management presentation entitled “Perspectives on First United,” 8/20/2019, attached as Exhibit 99.3 to Driver’s Schedule 13D filed on September 5, 2019.
8 From March 25 to September 3, First United’s stock price has increased by 29.17%, compared to a 0.06% increase in the SNL U.S. Bank $1B-$5B index. Source: S&P Global Market Intelligence.
9 E-mail from Carissa Rodeheaver to Abbott Cooper, dated September 2, 2019.
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Conducting more and more “analysis”—instead of taking the three simple steps set out above—seems to be nothing more than a feeble attempt to kick the can down the road and hope that shareholders forget about (i) the sizeable gap between likely sale value and current value, (ii) years of underperformance and (iii) a legacy of poor stewardship and indifference to shareholder concerns.
The fact that it appears that the First United board intends to perform these “additional analyses” without engaging financial advisors experienced in advising publicly traded banks and qualified legal counsel signals to Driver that delay is the primary—if not sole—objective and that the First United board is not serious about seeking to increase shareholder value. As one of First United’s largest shareholders—an investment partnership managed by Driver currently owns over 5% of First United’s outstanding shares, more than the entire board combined—Driver intends to hold the First United board accountable for both its past failings and its continued attempts to dodge its obligations to shareholders.
For too long, First United’s entrenched directors have appeared unconcerned with shareholder value and content with poor performance and paltry returns. The First United board’s blatant disregard of shareholder concerns is unacceptable to Driver, as it should be to all shareholders.
We urge you and the rest of the Board to take immediate and decisive steps to maximize value along the lines proposed above.
This letter will be filed as an exhibit to a Schedule 13D to be filed tomorrow.
/s/ Abbott
Abbott Cooper
Managing Member
Driver Management Company LLC
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Appendix A
| 1. | What exactly is the First United board’s current strategy? If it is “business as usual,” i.e., the strategy that has produced a total shareholder return that is more than five and a half times worse10 than similarly sized peers since First United first listed on NASDAQ, further analyses should hardly be required, since obviously that strategy is not working. If the First United board has adopted a different strategy, it should be shared with shareholders. |
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| 2. | Given First United’s long history of underperformance—as well as that sharp message sent by shareholders at this year’s annual meeting—why is the First United board only now considering alternatives to its current strategy? How long does something have to not work for the First United board to consider alternatives? |
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| 3. | What are these “additional analyses” that the First United board is going to conduct? Will they include a market check to ascertain the value that First United shareholders might receive in a sale? If not, how will the First United board have a benchmark to compare the merits of any other course of action? |
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| 4. | What is the timing for the completion of these “additional analyses”? You mention in your email that “This is not something that the Board can – or should – conclude in one or even a few meetings”—will the First United board be meeting more frequently in order to promptly conclude its “additional analyses?” |
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| 5. | Has a committee of the First United board been tasked with conducting these “additional analyses?” If so, who are the members? Are they empowered to retain their own financial and legal advisors? |
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| 6. | How will the results of these “additional analyses” be communicated to shareholders? Or, keeping with the First United board’s lack of concern for shareholders, will it be a case of (to paraphrase Jimmy Buffet) “if the phone doesn’t ring, it’s the First United board calling?” |
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10 S&P Global Market Intelligence (based on total shareholder return for FUNC (260%) and SNL US Bank $1B-$5B Index (1,456%) from 9/2/1992 to 3/25/2019).
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