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Dallas billionaire Gerald Ford strikes $500 million deal for troubled Pacific Capital bank

08:31 AM CDT on Friday, April 30, 2010
By BRENDAN CASE / The Dallas Morning News
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A private equity firm headed by Dallas billionaire Gerald Ford will pay $500 million for what is expected to be a 91 percent stake in troubled Pacific Capital Bancorp, the Santa Barbara, Calif.-based lender said Thursday.

Pacific Capital, hit hard by deterioration in California's residential and commercial real estate markets, has lost money every quarter since early 2008.

It said its banking subsidiary, Pacific Capital Bank, was not in compliance with minimum requirements to be considered well-capitalized.

Ford, 65, who built his fortune buying distressed lenders and turning them into moneymakers, has been looking for opportunities in today's banking industry. The Pacific Capital investment is coming from a unit of Ford Financial Fund LP.

"It took them awhile to find something, but this is a good opportunity," said Dan Bass, managing director of FBR Capital Markets in Houston.

Pacific Capital's stock closed at $2.19 Thursday, down $1.92. Its shares traded above $30 as recently as 2007.

Ford's infusion is "the best alternative available to us to assure the company's future," said Edward Birch, chairman of Pacific Capital, which had $5.4 billion in deposits as of March 31.

Ford and New York billionaire Ronald Perelman acquired a number of thrifts in the 1980s and 1990s and ended up with Golden State Bancorp, a large California-based savings and loan. Citigroup Inc. acquired Golden State in 2002 for about $5.3 billion.

Ford's net worth is estimated by Forbes magazine at $1.3 billion. Southern Methodist University's football stadium bears his name.

His deal with Pacific Capital is subject to certain conditions, including one involving the U.S. Treasury's Troubled Asset Relief Program.

Pacific Capital received $180.6 million from TARP, providing preferred shares in exchange. Under the Ford deal, the government would have to trade those shares for common shares worth an expected 7 percent stake in Pacific Capital. A Treasury spokesman declined to comment.

Existing shareholders would own the remaining 2 percent, although they could buy some additional shares in a rights offering.

Trading of Pacific Capital put options – or contracts to sell the company's stock at a certain price within a certain time – reached a record last week before Thursday's announcement knocked down the share price, according to Bloomberg News. Ford told Bloomberg he wasn't aware of the trading.

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