Goldman Sachs Group Inc. (GS) plans to acquire 24.9% stake in SKBHC Holdings, a Corona del Mar, California- based investment firm. On the other side, SKBHC is planning to fully acquire Minnesota-based Starbuck Bancshares Inc., the holding company of The First National Bank of Starbuck.
Both deals await Federal Reserve board approval. This acquisition will provide Goldman an opportunity to invest in banks across the country.
After acquiring Starbuck bank, SKBHC will get an access to its national bank charter, which is needed to buy other banks across the country. On the contrary, it was less expensive and easier for SKBHC to acquire a small bank with a national charter, rather than seeking a national charter on its own.
On the other side, First National would get access to extra technical support services and other resources, which were not there in the prior period.
Earlier this week, following Oaktree Capital Management and the Illinois teacher’s pension fund, a private equity fund of Goldman also planned to invest in a company, which is planning to buy failed U.S. banks. Therefore, Goldman gave an application to acquire stake in SKBHC Holdings. Oaktree is also planning to seek 25% stake in SKBHC and the Illinois fund voted to invest $100 million.
SKBHC also expects San Francisco-based private equity firm Friedman Fleischer & Lowe LLC to be an investor. As of Mar 31, 2010, Starbuck had $18 million in assets.
First National Bank has $17.9 million in assets and earned $29,000 in the first three months of 2010, while reported loss of $521,000 in 2009.
U.S. banks are collapsing amid losses on residential and commercial real estate loans. In the first quarter of 2010, the number of banks on the Federal Deposit Insurance Corporation’s (FDIC) list of problem institutions grew to 775 from 702 in the fourth quarter of 2009. This is the highest since the savings and loan crisis in the early 1990’s. It is expected that the number of failures in 2010 will exceed the prior year total of 140.
In the Twin Cities, institutional investors are exploring the market seeking to acquire banks or parts of banks.
Minneapolis-based Alatus, a developer that recently signed a purchase agreement for Block E in Minneapolis, has expressed interest in acquiring banks or parts of banks.
Goldman’s closest competitor JPMorgan Chase (JPM) continued to contribute to the economic recovery of small businesses and communities. JPMorgan has launched an initiative to increase small-business lending to $10 billion by the end of 2010.
In recent months, it has been viewed that investment firms has expressed interest in acquiring community banks, the reason being bad commercial real estate and construction loans. On the contrary, the investors are with the belief that the banks still play a valuable role, and would survive and profit with some extra capital.
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