BANKING/FINANCE : Hammond Co. Pays Out $2 Million in Tender Offer for 13.5% of Its Stock
The Hammond Co., a Newport Beach mortgage banking firm, paid out more than $2 million Friday to complete its successful tender offer for 13.5% of its own stock.
The company paid $5 a share to acquire the stock, which consists of 275,000 shares from the public and 130,000 shares from Thomas T. Hammond, the company’s chairman. The latter’s stake in the company remains 32%.
Reducing the total number of shares outstanding is a well-established method for a company to bolster its stock price when it believes the shares are undervalued. Hammond stock closed Friday at $4 a share, unchanged for the day.
Because more shares were tendered than Hammond had sought, the company ended up buying 76.4% of each shareholder’s tender. That is a result of the Dutch auction rules under which the tender offer was made.
Under a Dutch auction, shareholders offer their stock at prices within the range set by the company. The company then accumulates the stock, beginning with shares tendered at the lowest bids and working up the ladder until it reaches its target number of shares. But it pays all shareholders the price per share it took to acquire the last share needed.
Hammond had offered to pay between $4 and $5 for each share.