New York-based JC Flowers has won approval to acquire US-based Saddle River Valley Bank.
The transaction will result in Flowers purchasing 50.5 percent of the bank’s holding company, Saddle River Valley Bancorp. The firm will then attempt a buyout of the remaining stock through a tender offer.
Saddle River, which has two branches in New Jersey, has $82.8 million in assets. Further financial details were not disclosed.
JC Flowers will be financing the acquisition through its investment vehicle SRV Holdings.
The deal will allow the bank to boost its lending operations in New Jersey and New York, with SRV Holdings agreeing to invest additional capital in the future as part of the bank’s overall expansion strategy.
The bank’s management and employees will remain in place following the acquisition.
The Office of Thrift Supervision, a US banking regulator, approved the deal earlier this month. The regulator issued nine conditions on the acquisition, including the requirement at least 40 percent of the bank’s board of directors not be affiliated with JC Flowers.
The OTS declined to comment.
The deal follows rules put in place last year by the Federal Deposit Insurance Corporation, another US banking regulator. The agency established new regulations over private equity-backed bank buyouts, fearing firms would quickly sell off distressed bank assets.
Private equity: cashing in
The rules, among other measures, mandate private equity firms to ensure any acquired financial institution is capitalised at a Tier 1 leverage ratio of 10 percent; prevents GPs from using the acquired bank to extend credit to their own investment funds; and requires firms to hold their bank investments for at least three years.
The new rules followed the $900 million rescue of BankUnited, a collapsed Florida bank acquired by a consortium of private equity firms last May. BankUnited, which is owned by Blackstone, The Carlyle Group, WL Ross and Centerbridge Partners, is expected to file a $500 million IPO this week, according to various media reports.
The Blackstone Group is planning to acquire small banks around the US, provided the capital raising via the public offering is successful, as reported on PEO.