Alerus Financial price target lowered to $22.50 from $23.50 at Piper Sandler

Piper Sandler lowered the firm’s price target on Alerus Financial (ALRS) to $22.50 from $23.50 and keeps a Neutral rating on the shares after the company announced the acquisition of HMN Financial (HMNF) for $116.4M in a 100% stock transaction. Based on Piper’s preliminary calculations, it estimates TBV dilution of about 10% with an earn-back period of 3.1 years under the simple method. The firm is not surprised to see Alerus underperform the group by 500 bps given this sizable TBV dilution, limited franchise-additive benefits from this combination, and among other factors detailed below.