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The Treasury Department in 2010 took a massive haircut on its investment in Pacific Capital and now stands to make roughly 90 cents on the dollar from the bank's sale to UnionBanCal. It's a reminder that taking your lumps early on problem assets can be beneficial.
March 15 -
Debtholders battling with community banks over recapitalization plans have clearly scored a victory — but will it be a win-win?
July 29 -
An big investor in SWS Group (SWS) has objected to the Dallas company's planned sale to Hilltop Holdings (HTH).
April 7 -
Gerald J. Ford, a Texas investor who has bought and sold banks, thrifts, and mortgage lenders since the 1970s, is taking over the remains of Fremont General Corp. to build a new lending business.
May 23
Texas billionaire Gerald J. Ford, who has struck gold in California banking a few times, is back for more.
Ford's private equity firm, Ford Financial, has commenced a tender offer for up to 65% of the $3 billion-asset Mechanics Bank in Walnut Creek, Calif. Ford is offering shareholders $26,832 a share in cash, which represents 160% of the bank's tangible book value.
The offer to Mechanics' shareholders is the first deployment of funds from the $755 million Ford Financial Fund II. The funds were raised in mid-2013.
At least 51% of the shareholders must accept the tender offer for Ford to complete the transaction. Based on the bank's 19,380 shares outstanding reported in its 2013 annual report, Ford would be paying out $265.2 million to $338 million. The private equity fund said in a press release that it is structured and prepared to become a bank holding company.
Tender offers are often associated with hostile takeovers, but Mechanics said in a press release that its board had approved the transaction.
"The board strongly believes this transaction represents exceptional value for our shareholders and is in the best interest of our clients and employees," Christa Steele, Mechanics' president and chief executive, said in a press release. "We take great comfort in knowing that Ford Financial has an intimate understanding of the banking business, and is fully committed to upholding our longstanding culture of excellence."
Mechanics' stock is thinly traded, and the company may have been looking for a way to give its shareholders liquidity or at least access to it. The bank said in a press release that the offer gave shareholders the ability "to make their own investment decision regarding the offer in light of their unique investment objectives."
"We have used 2014 as a year of change in anticipation of a liquidity event to best prepare Mechanics Bank for significant planned growth in 2015 and beyond," Steele said in the press release.
Ford called Mechanics "a storied California institution," adding in a press release that the bank has a strong reputation.
Carl B. Webb, co-managing member of Ford Financial, praised Steele, who took the helm of Mechanics earlier this year.
Mechanics "has a clear strategic direction and a visionary leader in Christa Steele, who we fully endorse," Webb said. "We are impressed by the bank's focus on delivering superior client service, as well as its footprint in markets we know well from our extensive past experience in California."
Ford is a former chief executive of Golden State Bancorp, a company that, under his and Webb's direction, grew from $12 billion to $60 billion in assets. Golden State sold itself to Citigroup in 2002 for $4.9 billion.
At the onset of the banking crisis, Ford was attached to several possible recapitalizations, eventually investing $500 million in Pacific Capital Bancorp in Santa Barbara, Calif., in 2010. MUFG Union Bank, a unit of Mitsubishi UFJ Financial Group, bought Pacific Capital in 2012 for $1.5 billion, with Ford receiving $1.2 billion of the proceeds.
The tender offer for Mechanics is the second one tied to Ford this year. Ford is also the chairman of Hilltop Holdings in Dallas. In January, Hilltop
River Branch Capital is serving as financial advisor to Mechanics; Wachtell, Lipton, Rosen & Katz is its legal advisor. Sheppard Mullin Richter & Hampton is advising Ford Financial.
