This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Texas Billionaire, Treasury Win in $1.5 Billion Bank Sale (Update 1)

Updated with greater detail throughout.

NEW YORK ( TheStreet) --Texas billionaire Gerald Ford and the U.S. Treasury Department are set to benefit the most from UnionBanCal's $1.5 billion acquistion of Pacific Capital Bancorp (PCBC) for $46 a share.

The merger values Pacific Capital at a 60% premium to the company's Friday close, making the deal a windfall to Ford's investment fund, which holds a near 76% stake in the Santa Barbara, Calif-based lender. After making a preferred share investment in Pacific Capital as part of its $700 billion Troubled Asset Relief Program bank bailout in 2008, the U.S. Treasury will also benefit from the deal and its near 11% stake worth roughly $160 million, according to Bloomberg data.

After making a $181 million preferred share investment in Pacific Capital to help it weather a souring real estate portfolio, the bank had been unable to repay its bailout funds. Instead, in 2010, bank investor Gerald J. Ford invested $500 million in Pacific Capital, with the agreement to convert the government's preferred investment into common stock.

For Ford and his investment fund called the Ford Financial Fund, Monday's sale of Pacific Capital may be the bank investment coup that he was looking for in the aftermath of the credit crunch.

In 2009, Pacific Capital lost $421 million as its non-performing assets rose to $467.3 million. The bank's losses have since turned to profits, after it reported net income of over $70 million for 2011.

Prior to making his Pacific Capital investment, Ford and his investment partner Carl B. Webb had been looking for a bank to buy, hiring The Carlyle Group , The Blackstone Group (BX) and TPG Capital to bid on First Republic Bank (FRC), then a unit of Bank of America (BAC), according to Wall Street Journal reports. First Republic was sold to private equity firms General Atlantic and Colony Capital, leading to Ford's investment in Pacific Capital.

Ford, who is Chairman of Pacific Capital, has experience flipping banks for a big profit. Previously he ran Golden State Bancorp until it was acquired by Citigroup (C) in 2002 for $5.8 billion.

Monday's sale values Pacific Capital at roughly 1.6 times the bank's tangible book value. Synergies, tax benefits and an increase in the value of Pacific Capital's loan portfolio are expected to add to UnionBanCal's earnings, the company said in a statement. The Journal reported that in 2008, after spinning off from a larger investment fund, Ford Financial took $525 million in capital from limited partner investors like Yale University, Massachusetts Institute of Technology, and University of California. That fund had a shelf charter to buy failed banks from the Federal Deposit Insurance Corp, according to The Journal.

Pacific Capital shares rose over 57% to $45.15 in Monday afternoon trading. Prior to the deal, the company's shares were off roughly 7% in the last 12 months. In December 2010, Pacific Capital did a 1/100 reverse stock split.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

For UnionBanCal, which is owned by Japanese banking conglomerate Mitsubishi UFJ Financial Group (MTU - Get Report), the move will bolster its wealth management and banking presence in Santa Barbara and the central coast. Pacific Capital is the parent of Santa Barbara Bant & Trust, which has significant operations local operations and those near the state's coast.

"Santa Barbara and the Central Coast are very attractive regions for banking and wealth management services, and represent an important geographic expansion for Union Bank," said Union Bank Chief Executive Masashi Oka said in a statement.

UnionBanCal will add Pacific Capital's 47 branches to its 400-plus branches spread across California, Washington, Oregon, Texas and New York. Pacific Capital has $5.9 billion in assets, while UnionBanCal has $89.7 billion in assets, according financial statements as of Dec. 31.

While the deal is one of the 10 largest bank mergers of 2012, according to Bloomberg data, its also a rare sale of a bank that had been unable to repay bailout investments.

-- Written by Antoine Gara in New York

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
MTU $7.43 0.00%
AAPL $132.54 0.00%
FB $80.54 0.00%
GOOG $540.11 0.00%
TSLA $247.73 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs