Banking

Berkshire Hills draws investor’s ire for hiring CEO instead of pursuing sale

Berkshire Hills Bancorp is facing pressure from an investor that is upset with the Boston company’s decision to hire a new CEO rather than pursue a sale.

HoldCo Asset Management in New York, which said it owns about 3.3% of the $12.9 billion-asset company’s shares, also wants the board to authorize a new share repurchase program. Berkshire’s stock has been under pressure in recent months because of credit quality concerns during the coronavirus pandemic.

Berkshire disclosed last month that it had hired Nitin Mhatre, a former executive at Webster Bank, as its president and CEO. Mhatre is Berkshire’s third CEO in the past three years.

Mhatre takes over a company dogged by simmering investor concerns about senior leadership, most notably the sudden exits of its two previous CEOs.

HoldCo co-founders Vik Ghei and Michael Zaitzeff claimed in a Feb. 8 letter to Bill Dunleavy, Berkshire’s chairman, that the previous CEOs — Michael Daly and Richard Marotta — left “without any explanation whatsoever.”

Ghei and Zaitzeff said in their letter that, based on recent discussions with James Moses, Berkshire’s chief financial officer, they understood the company would pursue all options, including cost cutting, repurchases and a possible sale, after a rough 2020. But recent comments attributed to Moses by the investors made it seem less likely that a sale or buybacks would occur.

Moses did not respond to a request for comment Tuesday.

A Berkshire spokesman John Lovallo said the company looks forward to engaging with HoldCo.

“The board and management team are fully aligned on the long-term strategic direction of the bank,” Lovallo said. “Under the leadership of our new chief executive officer … we are focused on improving shareholder value through initiatives.”

Lovallo said those initiatives could include branch closures, rationalizing the balance sheet, digitizing and automating processes and a focus on core products and services. “We have begun to see the results of some of these initiatives, which is being reflected in the performance of our stock over last six months,” he said.

Berkshire recently reported a $533.3 million net loss available to common shareholders last year after earning $96.5 million in 2019. The 2020 results included a $549 million second-quarter loss that featured a large goodwill impairment change tied to the deteriorated value of past acquisitions.

The company has been setting aside funds in recent quarters to cover potential loan losses, including a $10 million provision in the fourth quarter.

Berkshire is the second Boston company to rankle HoldCo in recent weeks.

The investor has been ramping up criticism of Boston Private Financial Holdings since the $9.7 billion-asset company agreed to be sold to SVB Financial Group in Santa Clara, Calif. HoldCo has argued that the deal’s $900 million price tag undervalued Boston Private.

HoldCo in late January submitted a notice starting its intention to nominate up to five candidates, including Ghei and Zaitzeff, to run for seats on Boston Private’s board.



 

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