BankUnited, as I warned, is back in the news. It seems that the CEO of the “equity fund” that bought the bank (for virtually no money, as you should recall or can read here), John Kanas, is ready to cash in- for a price. BankUnited has retained Goldman Sachs to entice/entertain various offers. Two offers were already made (rumor says) and were undergoing evaluation: one from BBT (Branch Banking and Trust) and the other from Toronto-Dominion Bank (the entity who acquired Commerce Bank). (PNC Bank elected NOT to participate in this auction effort.)
As you recall, BankUnited is a 90 branch bank (headquartered in Miami Lakes, Florida) with about $ 11 billion in assets. Its acquisition should help augment either of the two above bank’s Florida markets. The questionable portion of the deal is BankUnited’s mortgage business, which is why the bank is still not really profitable.
The scuttlebutt is that for the offer to be accepted, it will have to exceed $ 2 billion- by a lot. The other issues for this sale: BankUnited can’t acquire other Florida banks (too troubled or too high-priced)- and it doesn’t like to be regulated. With BankUnited’s asset value, this bank is subject to the new requirements of stress testing the bank’s capital, loan portfolio and investments. [As a matter of fact, Stephen Schwarzman (CEO of Blackstone) is converting its ownership to non-voting shares, thereby removing it and him from the purview of the Federal Reserve.]
Of course, the fact that Blackstone, Carlysle, and Centerbridge (the hedge funds behind Kanas) bought this bank for $945 million, sold part of their stock (collecting $ 500 million) and, thereby, rendering their net investment of $ 445 million worth (on paper) $ 1.5 billion, has nothing to do with this sale (or the fact that the bank is NOT making money). But, it’s my guess that the offer will have to be closer to $ 3 billion to have the sale go through- and that may be too dear a price for either bank (and probably any other bidder) to swallow right now. (By the way, that would make this venture provide a 7 fold return on cash invested, pretty good for any venture investment.)
Kanas had grown a Long Island bank (North Fork Bancorp) into a fairly strong commodity. He did so by sticking to traditional banking- not playing with derivatives, or other items that have doused the future capabilities of many other banks. You may recall North Fork was the bank that Capital One (then among the largest- and most profitable- credit card companies) bought to change from a credit card company to a full-fledged bank. (Capital One subsequently bought Chevy Chase Bank to extend their empire from New York to Virginia). Kanas managed to clear about $ 175 million or so on that sale of North Fork.
That is the official plan for BankUnited. But, it’s still not clear that’s going to happen. In spite of Kanas’ own money, in concert with Blackstone-Carlyle-Centerbridge’s $ 445 million ($23.5 of that came from Kanas), the public investment ($630 million, of which only $ 85 million made it to the bank), $ 2.2 billion from the FDIC, we can still expect the FDIC to have to shell in another $ 5.7 billion. Given these facts, the hedge fund folks expect to collect significantly more than $ 2 billion on the sale of BankUnited.
Amazingly, BankUnited is considered a success story. Because of the way it was acquired, including the FDIC guarantees, it got valued by the stock market at $ 2.6 billion ($1.5 billion is the holdings of the hedge fund group). It had gone public at $ 27 a share; and was valued close to $ 26, when the offers were coming in mid-January 2012. After the refusal by the bank to entertain the two offers (both around the offering price of the stock), the stock dropped to the range of $ 22 – $ 23; it’s currently $ 23.50. Stay tuned for the next chapter…
Bank $henanigans seem to be rife everywhere.
In the UK there has been much media surrounding The Royal Bank of Scotland (RBS) and bonus packages paid to their executives.
During the credit crisis RBS was bailed out by the UK Government that now owns 83% of the bank. Since then RBS has cut around 21,000 jobs and shares in the last year alone have dropped by 36% yet the chief executive was offered a £1m share bonus for his performance last year. Which after much media and public pressure he as declined.
It seems that people all over the world are going to be getting fat off the public coffers!
James Debono recently posted..Stop Holding Yourself Back – Break Through The Barriers
Absolutely true, James.
Moreover, more and more companies (those on the US stock exchange) are also providing bonuses for companies that are in financial trouble, skirting the US regulations. And, some that are in bankruptcy are even giving bonuses if they exit bankruptcy in less than 12 months (like that really is a rewardable effort)!
Thanks for your comments.
Roy
When did the whole banking thing get so out of whack – the Great depression or the current depression. Saw a movie that implied the banks have been out of whack for about the last 25 years and abusing business to line some people’s pockets. And that is globally not just the USA
Roberta recently posted..Stuck feeling Old
Roberta, you are about right in the timing. In the states, it was compliments of presidents 4 and 5 back- you know, the ones that business wanted so that regulation would stop harnessing their ability to do whatever they wanted. In England, it was the one being lionized now. And, it permeated the world scene.