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WL Ross, Yucaipa in union-backed bank deal

The private equity firms will invest $50m each in Amalgamated Bank for a shared 40% stake in its common stock.

WL Ross & Company and The Yucaipa Companies have acquired a minority stake in Amalgamated Bank, the only American labour union-owned bank, for $100 million. The investment represents a 40 percent stake in the bank’s common stock.

The acquisition is subject to regulatory and shareholder approval and is expected to close in the fourth quarter. The investment, split evenly between the two firms, will enable Amalgamated to exceed required capital levels required by the New York State Banking Department and Federal Deposit Insurance Corporation, according to a statement. 

“Labour unions have all sorts of banking needs, and we feel that this institution, with some additional capital, with some further sources of ideas, could build a very large business by providing specialised services that are needed by today’s labour unions,” firm founder and chief executive officer Wilbur Ross told Private Equity International.

Yucaipa has a history of investing in labour backed deals and holdings. In 2005, the firm acquired Aloha Airlines out of bankruptcy with the support of the airline’s labour unions. Yucaipa also invested $150 million in Pathmark Stores in 2006, a deal which was lauded by The United Food and Commercial Workers Union.

The banking industry has struggled as of late, suffering the negative impacts of an unstable investment climate in the wake of the Eurozone crisis and the downgrade of America’s credit rating. In July, Ross was part of a consortium of investors that took a 34.9 percent stake in Bank of Ireland in a deal that reportedly rescued the bank from nationalisation.

“We’ve invested in quite a few banks already … precisely because they are under distress. And we think that creates a real long term opportunity,” Ross said.

Ross launched its fifth recovery fund in August 2010, targeting $4 billion. The fund had raised nearly $450 million at 12 August, according to US Securities and Exchange Commission filings.