-
The Florida bank found out this week that the golden rule of M&A that sellers are in the driver's seat may not be true in this market. It was a major miscalculation, experts say.
January 20 -
BankUnited Inc. once seemed intent to grow on its own. But now, after a brief flirtation with selling itself, the company's main job will be assuring key constituents that it's simply going to stick around.
January 19 -
BankUnited issued a press release confirming rumors that it did in fact engage an investment bank to find a possible buyer for the company, but has opted to stay independent.
January 19 -
The competition for failed banks in Florida is so intense that the private-equity financier Wilbur L. Ross Jr. went looking for greener pastures. He found them in Michigan.
June 1
It is not common to get in the head of a billionaire. But this week, American Banker reached out to Wilbur Ross of WL Ross & Co., a private-equity firm that began focusing on banks in the United States and Europe during the onset of the downturn, hoping to capitalize on the rebound.
Ross responded Monday via email and gave unique insight into the recent process to try and sell BankUnited Inc., one of his portfolio banks. He also discussed his expectations for the Miami Lakes, Fla., company's future and how his opinion of banking has evolved over the last few years.
In 2009, Ross banded with other private-equity firms to pitch in roughly $900 million to buy the assets, deposits and name of BankUnited, a Florida thrift that was taken over by federal regulators after massive losses on option-arm loans.
The new company, also called BankUnited, came out swinging with John Kanas, the former chairman and CEO of North Fork Bancorp, at the helm. It took out large advertisements in newspapers across Florida calling on bankers to join the $11 billion-asset company. In January 2011, the company went public, raising an additional $783 million in capital. Last summer, BankUnited said it would venture to New York, with the acquisition of Herald National Bank.
So earlier this month when rumors began to swirl that the company had hired Goldman Sachs Group Inc. to find a buyer, observers saw the move as a head-scratcher. Most people viewed it as premature and said that, given the caliber of the backers and management, they thought BankUnited was designed to be a consolidator. Perhaps the management found the current economic and regulatory environment so bad that the team thought a sale was in its best interest, others wondered.
Last week, the company confirmed that it had initiated a process to explore strategic alternatives, but didn't give specific details, including the name of the investment bank. It did, however, say that it had further decided to stay independent for now. In that same release, BankUnited said that, in the fourth quarter, deposits were up 24% annualized and assets were up 139% annualized.
Further rumors say BanUnited was deflated by lower-than-expected bids. It reportedly wanted $30 or more a share, but the two bidders — BB&T Corp. and Toronto-Dominion Bank — were unwilling to pay that much.
The following is Ross' email:
WILBUR ROSS: Our original thesis was that bank investments would involve a 3 to 5 [year] time horizon. When BankUnited went public, it became a partial realization at a price we expected to come later in the cycle.
The recent brief exploration of strategic alternatives came about because a major investment bank came to us with a well-documented thesis that there were multiple banks that would pay a substantial premium above market. As a publicly quoted company we felt we should have a very brief (two-week) process to determine whether they were correct.
It turns out they were wrong, so management is no longer distracted and will continue the original plan of rapid branch openings and substantial generic growth in loans and deposits, as well as the Herald and hopefully other acquisitions. You saw the excellent results in [BankUnited's] recent press release.
A few major things have changed. First, we had forecast that the economy would recover more rapidly than it has and that therefore rates would be higher in 2012 and 2013 than they now are likely to be. We also underestimated the incremental regulatory burden that would be imposed on the industry. We believe that these phenomena, combined with the number of banks remaining on the FDIC's watch list will make acquisitions by us more attractive. The run up in deal prices over the last couple of years made it hard for us to implement much of the acquisition component of our strategy.
We believe that the regulatory burdens will mean that few if any banks with less than $1 billion of assets will be viable in this [interest] rate environment even if their loan portfolios are okay. They would become viable in our hands because they would be operated as branches without the administrative superstructure.
We also believe that the mega banks will have to raise their service charges and lending spreads in order to make a decent return on equity now that they won't have the trading profits. Therefore we believe that banks of [BankUnited's] size will constitute the sweet spot in commercial banking.
Meanwhile, BankUnited continues to build up retained earnings and book value rapidly and therefore is continually gaining in fundamental value. Our only discouragement is that regulatory attitudes toward private equity seem to be becoming less friendly in the United States and that is among the reasons we invested in Bank of Ireland and in Virgin Money's acquisition of Northern Rock. Odd as it may be, the Irish and U.K. regulators seem more comfortable with private equity than is true in the U.S.
