BankUnited Deal May Signal New PE Push

An investor consortium's $900 million deal for BankUnited (BKUNA) last week represents one of the biggest private equity acquisitions of a U.S. bank, but is unlikely to be the last.

Private equity firms, including WL Ross & Co., Carlyle Group, Blackstone Group (BX) and Centerbridge Capital Partners bought the seized Coral Gables, Fla., thrift from Federal Deposit Insurance Corp. receivership. The group beat out a reported rival bid made by a partnership of Toronto-Dominion Bank (TD) and Goldman Sachs (GS).

"This is a unique partnership, in that the FDIC engaged in a rather lengthy process of bidding," said John Kanas, the former North Fork Bank CEO who will run the new BankUnited for the investor group. "Quite a number of people were looking at this company and doing due diligence. It's obvious that the selection of our group by FDIC represented the least costly resolution to U.S. taxpayers."

The deal ranks as the third largest private equity acquisition of a savings and loan institution since the start of the economic crisis last year, according to data from Dealogic. A consortium of private equity firms including J.C. Flowers & Co. in January acquired most of IndyMac Bank FSB's assets for $13.9 billion. The much larger Washington Mutual was scooped up by JPMorgan Chase (JPM), after it was seized by regulators in October. Both deals received generous loss-sharing provisions or loss protection from the FDIC.

But those deals occurred last year, in the heat of the crisis, when it was unclear how bad the situation would get, and the FDIC was eager to resolve the IndyMac and WaMu situations. The result of the BankUnited auction may provide a better glimpse of what lies ahead for private equity names chomping at the bit for distressed-bank takeover opportunities.

"These funds all recognize there is a potential gain here and they have the capital," says Lawrence Kaplan, former senior lawyer at the OTS and who now practices in the banking and financial institutions group at the law firm Paul Hastings. "We are now sitting here with an interesting challenge: These banks need capital and these funds have the capital. And the regulators are challenged in thinking, "How do we marry the two?'"