BKUNA- A Private-Equity Bid Is Key for Bank Deals Ross-Led Group Seeks BankUnited; Others May Follow
By JOE BEL BRUNO
NEW YORK -- For the private-equity industry, the future of BankUnited Financial Corp. might be the most closely watched deal of the year.
The Coral Gables, Fla., thrift, with 85 branches scattered mostly in South Florida, could serve as an indicator of how private-equity firms enter the banking industry. Federal regulators earlier this year declared that BankUnited was "critically undercapitalized" and ordered it to find a buyer or raise new capital.
Among the bidders expected to make a pitch by Tuesday's deadline is a consortium of private-equity shops led by billionaire investor Wilbur L. Ross. If successful, it would be one of the largest acquisitions in the financial-services sector made by private equity, and could signal a shift in the government's attitude toward private-equity buyers of banks.
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Billionaire investor Wilbur L. Ross speaks in Michigan in 2008. Wilbur Ross Wilbur Ross
To be sure, private equity might not win the bank. Regulators have traditionally favored lenders against other bidders in sales of banks. In the case of BankUnited, a bid also is expected from Canada's Toronto-Dominion Bank, which has significant operations in the U.S. through TD Bank and TD Ameritrade Holding Corp. That offer also is expected to include Goldman Sachs Group Inc.
"Everyone is watching this deal," said Harvard Business School professor Josh Lerner, who tracks the private-equity industry. "This could be a template that will open the floodgates in terms of transactions."
He said a winning bid by the consortium might help draw some of the estimated $450 billion of private-equity money off the sidelines and into banks. It also might show a willingness by the government to accept private equity over other banks as new owners.
Mr. Ross has long wanted to buy into the financial-services sector. He hired John Kanas, the former chief executive of North Fork Bancorp, to help run BankUnited if the deal is successful. Other members of the consortium include Carlyle Group LLC, Blackstone Group LP and Centerbridge Partners LP.
Mr. Ross, who made a name on Wall Street decades ago after buying and selling steel companies, has looked to buy for the past year, a person familiar with the matter said. He already has taken a 68% stake in First Bank & Trust, a small Indiantown, Fla., bank, for an undisclosed sum.
"He has been champing at the bit to buy a bank, and Kanas has helped to guide him when the time was right," said the person. "If Wilbur gets this deal, it will signal to everyone that it's time to go back into banks." Mr. Ross didn't return calls to comment, and a spokesman for the consortium also declined to comment.
The real test will be if the government will allow Mr. Ross to complete the transaction. Private-equity firms essentially were shut out of bidding on Bear Stearns and Lehman Brothers last year. There has been speculation the Federal Deposit Insurance Corp., which handles auctions for failed banks, hopes a bank puts in an 11th-hour bid.
One reason private equity hasn't done well in bidding on failed banks is that "existing banks have a big cost advantage," said Gerard Cassidy, an analyst with RBC Capital Markets. "The FDIC is more comfortable in selling a distressed bank to another bank because they have a history and a track record of regulating them."
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