Return to search

ALL THE WAY TO THE BANK

With a little regulatory creativity, four US private equity firms have carved out a banking niche. More are sure to follow. By Cezary Podkul.

HOLDING FORTHPrivate equity firms registered as bank holding companies

NAME OF FIRM APPROXIMATE DATE NUMBER OF BANK HEADQUARTERS FOUNDERS
AUM ($M) FORMED INVESTMENTS
MADE SINCE FOUNDING
Castle Creek Capital $192 1995 42 Roncho Santa Fe Founded by former bankers
John Eggemeyer and William Ruh
Belvedere Capital $150 1996 18 San Francisco Founded by former board
member of the Federal Reserve
Bank of San Francisco Richard
Decker and Anthony Frank,
former US Postmaster General
CBIA $13 2006 1 Richmond (Virginia) Founded by lifetime bankers
Timothy Anonick and
Laurence Fentriss
CapGen $500 2007 1 New York Founded by former US
Comptroller of the Currency
Eugene Ludwig
JC Flowers N/A 2008 NA New York Founder J. Christopher Flowers is
reportedly establishing a sepa
rate entity under his own name
to make bank investments

LEONARD GREEN COMPLETES $754M EXIT
US private equity firm Leonard Green & Partners has sold floral delivery service company FTD Group for $754 million, roughly $46 million below the original announced purchase price. The purchaser, internet consumer product and service retailer United Online, will pay FTD stockholders $441 million, consisting of $307 million in cash and 12.3 million shares of United Online common stock. The remainder of the $754 million price tag consists of the repayment of FTD debt and expenses associated with the transaction. Southern California-based United financed the transaction with a $425 million credit facility from Wells Fargo Bank.

US private equity firm Leonard Green & Partners has sold floral delivery service company FTD Group for $754 million, roughly $46 million below the original announced purchase price. The purchaser, internet consumer product and service retailer United Online, will pay FTD stockholders $441 million, consisting of $307 million in cash and 12.3 million shares of United Online common stock. The remainder of the $754 million price tag consists of the repayment of FTD debt and expenses associated with the transaction. Southern California-based United financed the transaction with a $425 million credit facility from Wells Fargo Bank.

MERVYN'S FILES LAWSUIT AGAINST PE BACKERS
California retail chain Mervyn's, acquired for $1.26 billion in 2004 by a Sun Capital Partners- and Cerberus Capital Management-led investor group, has filed a lawsuit against its private equity sponsors and owners following its Chapter 11 bankruptcy filing in late July. Funds affiliated with Lubert-Adler Real Estate, Cerberus Capital Management and Sun Capital Partners were named as defendants in the suit, which alleges that around $1 billion of real estate assets were transferred out of Mervyns' control and then leased back to the company, resulting in rents that were “substantially higher” than what had been charged to Mervyn's before the transaction. “The 2004 transaction is a transaction that ultimately led to Mervyn's bankruptcy” and “Mervyn's transferred away its real estate assets and paid at least $58,000,000 in transaction related fees without receiving any benefit from the transaction,” the lawsuit alleges.

OAKTREE IN TWO SPECIALITY CHEMICALS DEALS
Distressed debt specialist Oaktree Capital Management has purchased publicly-listed Nevada Chemicals for $94 million while also acquiring CVC-owned Evonik Industries' North American cyanide activities. Oaktree partnered with cyanide manufacturer Cyanco in tendering a cash offer of $13.37 per share for the common stock of Nevada Chemicals. Separately, Oaktree purchased all of Evonik's North American cyanide activities, which include a 50 percent stake in Cyanco. Oaktree will also pick up two other formerly Evonik-owned divisions, Cyplus Canada and Cyplus Corporation. Oaktree made the investments from OCM Principal Opportunities IV, its $3.3 billion private equity vehicle.

MADISON DEARBORN EXITS DREDGING COMPANY
Chicago-based Madison Dearborn Partners will sell its roughly $100 million remaining stake in Great Lakes Dredge & Dock (GLDD) as part of the Nasdaq-listed dredging company's shelf offering. GLDD has filed for the secondary public offering of more than 18 million shares of its common stock, of which Madison Dearborn owns 14 million shares. Madison Dearborn purchased GLDD for $340 million in cash in 2003 from now defunct Citigroup Venture Capital, which had owned the company since 1998.

MICROSOFT TOPPLES $426M QUADRANGLE DEAL
Microsof t has agreed to buy Greenfield Online, a Connecticutbased provider of internet survey services and owner of European price comparison website ciao.com, for approximately $486 million. The agreement trounced an earlier takeover offer of approximately $426 million by US media and communications-focussed buyout firm Quadrangle Group. A person familiar with the transaction said that the firm decided not to top Microsoft since the software giant had made clear its intention to outbid Quadrangle if it increased its offer. Consequently, Quadrangle walked away from the transaction, pocketing a $5 million transaction termination fee.

WATERMILL EXITS FASTENER COMPANY
Massachusetts-based Watermill Ventures has exited its investment in Vertex Fasteners to DXP Enterprises, a distributor of industrial equipment and services, for $65 million. DXP financed the acquisition of the industrial fasteners distributor with a new $200 million senior credit facility. Watermill acquired Vertex in partnership with its management in August 2005 for an undisclosed amount. The sales and EBITDA of Vertex for the year ended 3 May 2008 were approximately $71.9 million and $13.3 million, respectively. Over the last three years Watermill supported add-on acquisitions as well as product line and segment expansion for the firm.

BABCOCK & BROWN CLINCHES C$634M SCHOOLS DEAL
A consortium of investors led by Babcock & Brown Public Partnerships, a London Stock Exchange-listed social infrastructure fund, has closed on a 32-year concession to design, build, finance and maintain 18 schools in the province of Alberta, Canada for C$634 million ($594 million, €413 million) . The project marks Babcock's second public private partnership project in Canada and also the largest school development project in the history of that country, with estimated total capacity of more than 12,000 students. Babcock will have a 75 percent equity stake in the project. The remaining interest will belong to Gvest Infrastructure and Development Fund, a local investment vehicle affiliated with Graham Construction. Graham, along with local contractor Bird Construction, will build the schools, which will be owned and operated by the local school boards just like conventional schools.

FIRST RESERVE IN C$596M OIL DRILLER TAKE-PRIVATE
US private equity firm First Reserve has purchased Canadian oil drilling and well maintenance company Saxon Energy Services in a C$596 million ($561 million; €382 million) take-private. The Greenwich-based energy specialist partnered with Canadian oilfield services company Schlumberger in tendering a C$7 per share offer for Calgary-based Saxon. When originally agreed, the deal represented roughly a 2 percent premium over the company's previous day closing price. Saxon provides drilling services, well completion and workover services to oil and gas companies throughout North and South America.

TPG WAIVES WAMU RESET RIGHTS
TPG has waived price reset payment provisions agreed in accordance with its $2 billion investment in US savings and loan giant Washington Mutual (WaMu) last April, according to regulatory filings. In waiving the anti-dilution measure, TPG gives up the right to be made whole on its holdings of WaMu's common shares should the bank raise more than $500 million of additional capital or sell itself for a price below TPG's $8.75 entry price. It also gives the beleaguered bank flexibility in pursuing additional capital raisings or a sale at a time when it is struggling to shore up its finances since now it can do so without having to make a potentially large monetary payment to TPG. Media reports indicate TPG has sold down its original investment to $1.3 billion, spread across three different funds.