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Doral's White Knight Retreats

Doral Financial (DRL) sank 27% after FBOP Corp. dropped its takeover offer for the struggling Puerto Rican bank.

FBOP, which is Doral's second-largest shareholder, with a 4.6% interest, said it instead plans to vote in favor of a $610 million deal previously proposed by a private-equity consortium led by Bear Stearns (BSC).

Shares of Doral slid 43 cents to $1.17 on Monday.

Last month, Bear Stearns' merchant banking arm, along with Marathon Asset Management, Perry Capital, D.E. Shaw, Tennenbaum Capital Partners, Eton Park Capital Management, Canyon Capital Advisors, Goldman Sachs (GS) and GE Asset Management, offered to acquire a majority interest in Doral for $610 million, or 63 cents a share -- barely half of Doral's current trading price.

That deal would leave Doral shareholders with just 10% of the company.

But in early June, it appeared that Doral's white knight had appeared. FBOP, a closely held bank owner based in Oak Park, Ill., submitted a competing proposal offering $1.41 a share. That deal also totaled $610 million, but it left investors with 20% of the company. The stock soared more than 51% on the news.

Now it appears that Doral investors will have to settle for the steep discount originally proposed by the consortium. Doral said Monday that FBOP pulled out of its offer after completing due diligence on the company.

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