HarborOne Bancorp Merger Under Scrutiny: Investor Alert as Legal Probe Questions Deal Terms

The proposed merger between HarborOne Bancorp (NASDAQ: HONE) and Eastern Bankshares, Inc. (NASDAQ: EBC) has sparked a high-stakes legal inquiry, as Kahn Swick & Foti, LLC (KSF)—a firm led by former Louisiana Attorney General Charles C. Foti, Jr.—examines whether the transaction fairly values HONE shareholders or falls short of fiduciary standards. With a $490 million deal structure and a shareholder vote looming, the investigation underscores a growing trend of activist scrutiny over bank consolidation terms.

Deal Terms and Strategic Rationale

Under the April 2025 merger agreement, HarborOne shareholders may elect to receive either 0.765 shares of Eastern Bankstock or $12.00 in cash per HONE share, with 75–85% of shares allocated to stock. Based on EBC’s closing price of $15.48 on April 23, 2025, the deal values HONE at approximately $24.70 per share. The merger aims to create a $31 billion regional banking powerhouse, combining Eastern’s Greater Boston presence with HarborOne’s 30 branches in Massachusetts and Rhode Island. Key benefits cited include 16% earnings per share (EPS) accretion, a 2.8-year tangible book value earnback, and expanded community lending programs.

The Legal Probe: Questions Over Valuation and Process

KSF’s investigation centers on two critical issues:
1. Undervaluation Concerns: Critics argue the $12 cash option and stock ratio may not reflect HONE’s intrinsic value. If EBC’s stock underperforms post-merger, the deal’s fairness could be called into question.
2. Process Fairness: KSF is scrutinizing whether HarborOne’s board adequately explored alternatives or exerted independence in negotiations. Notably, all HarborOne directors and executives have pledged to vote in favor of the merger, raising red flags about potential conflicts of interest.

The firm urges shareholders to contact them toll-free at 855-768-1857 or via its case-specific portal to discuss legal options, including potential claims under securities laws.

Data-Driven Analysis: Valuation Benchmarks

To contextualize the merger terms, consider these metrics:
- Peer Comparisons: Regional banks with similar asset sizes (e.g., $20–$30 billion) typically trade at 1.5–2.0x tangible book value. HONE’s pro forma tangible book value of ~$15.20 per share (based on EBC’s April 23 price) suggests the stock component offers a 1.68x multiple, near the lower end of this range.
- Cash Option Discount: The $12 cash offer represents a 21% discount to the implied stock value at the deal’s announcement, raising questions about asymmetry in shareholder treatment.
- Regulatory Risks: The merger’s $490 million value could trigger heightened antitrust scrutiny, particularly in markets like Brockton, MA, where overlapping branches may violate competition laws.

Shareholder Considerations and Risks

While the merger offers operational synergies—such as combined wealth management services and $20 million/year in community programs—shareholders face critical decisions:
- Vote Strategy: Electing cash could lock in immediate gains, but stock recipients may benefit if EBC’s valuation rises post-merger.
- Litigation Risk: If KSF’s probe uncovers procedural flaws, shareholders may pursue claims to renegotiate terms or seek damages.
- Market Uncertainty: Regional banks face headwinds from rising interest rates and digital disruption, which could dampen the merger’s projected EPS accretion.

Conclusion: A Deal Divided by Value and Process

The HarborOne-EBC merger stands at a crossroads. Strategically, it creates a dominant New England player with $31 billion in assets and operational efficiency gains. However, KSF’s investigation highlights material uncertainties: Is the $12 cash option a fair floor, or does it undervalue HONE’s community banking strengths? Did HarborOne’s board negotiate aggressively, or did conflicts of interest compromise the process?

Shareholders should weigh the 16% EPS accretion against the 21% discount on cash versus stock terms. Historically, bank mergers with such asymmetry often face shareholder lawsuits, as seen in cases like First Citizens’ acquisition of Silicon Valley Bank. With regulatory approvals still pending and EBC’s stock price volatile, investors are advised to monitor both the legal inquiry and market reactions closely. The outcome could set a precedent for how fiduciary duties are enforced in regional banking consolidations—a critical lesson for stakeholders in an era of heightened scrutiny over corporate governance.

In the coming months, the answers to these questions will determine whether this merger becomes a model of fair process or a cautionary tale of undervalued assets.