If a Monday acquisition of Pacific Capital Bancorp (PCBC) for by UnionBanCal for $1.5 billion is any indication of 2012 deal activity, banks held by private equity owners may increasingly make it to the selling block.
In the California bank consolidation, UnionBanCal's is buying Pacific Capital Bancorp for $46 a share or a 60% premium to share prices prior to the deal announcement.
For Pacific Capital's 76% shareholder, the Ford Financial Fund, a private bank investing firm run by Texas billionaire Gerald Ford, the deal is a large windfall on a $500 million investment. The acquisition also was a benefit to U.S. Treasury Department, which held roughly 11% of Pacific Capital's outstanding shares After making a $181 million preferred share investment in Pacific Capital as part of its $700 billion Troubled Asset Relief Program bank bailout in 2008.
Other significant bank's owned by private equity firms include First Republic Bank (FRC), BankUnited (BKU), Boston Private Financial (BPFH), Central Pacific Financial (CPF), Webster Financial (WBS) and National Penn Bancshares (NPBC), among 23 in total notes McGratty in a Jan. 22 report.While UnionBanCal -- owned by Japanese banking conglomerate Mitsubishi UFJ Financial Group (MTU) after a $3.6 billion acquisition in 2008 - has cut the first in a possible flurry of private equity-backed bank strategic acquisitions, the deal also highlights a M&A rationale. UnionBanCal said that the premium-priced acquisition would be accretive to earnings as a result of synergies and hundreds of millions in deferred tax assets that came with Pacific Capital. Because Pacific Capital struggled to turn profits since the crisis, a merger allows the acquirer to make use of tax benefits to those losses. "Unique to this transaction, Union Bank is reversing Pacific Capital's $248mm DTA valuation adjustment and is recording a $20mm net write-up of the 2010 credit mark (after tax). As a result, the as-reported
For UnionBanCal, the move is also a quick way for it to grow its wealth management and banking presence in Santa Barbara and the central coast of California. Overall, 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 to filings as of Dec. 31. In 2010, bank investor Gerald Ford invested $500 million in Pacific Capital, with the agreement to convert the government's preferred investment into common stock. For Ford, Monday's sale of Pacific Capital may have been the bank investment coup that he was looking for in the aftermath of the credit crunch. After the crisis hit, Ford had been looking for a distressed bank to buy, hiring The Carlyle Group, The Blackstone Group (BX) and TPG Capital to bid on First Republic Bank, then a unit of Bank of America (BAC). Instead, First Republic was sold to private equity firms General Atlantic and Colony Capital and is now among the banks that McGratty notes is a top performing private equity investment. -- Written by Antoine Gara in New York
Check Out Our Best Services for Investors
Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Check Out Our Best Services for Investors
Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.