Wilbur Ross – A Guy Who Likes to Run Into Burning Buildings
Here is an article on his most recent venture, beaten down banks:
Early one October morning, Wilbur Ross sits before a dozen or so colleagues at the head of a long table in his Manhattan office, considering in his quiet way the purchase of a business worth more than a billion dollars. Ross, 74, is the chairman of WL Ross & Co., among the largest and most active firms specializing in the purchase of distressed companies; in other words, he is a vulture, albeit a well-dressed one, favoring crisp pinstripe suits and freshly shined shoes.
His investment committee is presenting the final details of the firm’s $1.2 billion bid for Northern Rock, the English bank seized by the British government in 2008 after panicked depositors withdrew their funds. WL Ross is partnering with Richard Branson’s Virgin Money.
“Who is our competition?” asks Pamela Wilson, a WL Ross managing director.
“J.C. Flowers is always our competition on everything,” says Stephen Johnson, one of the firm’s vice-presidents, referring to J. Christopher Flowers, another private equity investor. Johnson adds, “The word at the moment is that he won’t be able to bid on this.”
That leaves the field open for Ross, who describes himself as “a guy who likes to run into burning buildings” and who has been running into a lot of them lately. The committee spends much of its time talking about the need to structure the bid so it won’t embarrass the British government, which has spent an estimated $2.2 billion on the Northern Rock bailout. The firm plans to offer the Cameron administration a slice of the proceeds if it takes the bank public.
Ross himself says little, and when he does, he does so in his characteristic near- whisper. It would not be overstating it to say Ross coos. He scrutinizes a pile of documents before him. From time to time he asks a question. He wants to make sure there will be no last-minute regulatory issues. Finally, he says, “I think we are ready to vote on this.”
On Oct. 25, Virgin and WL Ross make their offer. Three weeks later, the British government accepts it and controversy soon follows. Ed Balls, the Labour Party’s shadow chancellor, assails England’s Conservative Party leaders for taking a loss on the bank. Ross arguably makes matters worse by telling British reporters that he hopes to make a substantial profit—unless, of course, Northern Rock is swamped by the European financial crisis that enabled him to buy it so cheaply in the first place. This is a familiar scenario these days. Ross stands to make a lot, if he doesn’t lose even more.
Since 2008, Ross has invested $1.8 billion in faltering banks, a major play by a high-profile player. Ross is an investor’s investor; he’s not a household name like Warren Buffett or a constant presence on the cable channels like Pimco’s Bill Gross, but he’s revered and followed in his field. “He’s charming, and he’s smart,” says Steven Kaplan, a professor of finance at the University of Chicago Booth School of Business. “And he has been brilliant and contrarian in discerning opportunities.” He is also worth an estimated $2.1 billion, according to Forbes.
His firm was one of four private equity groups that paid $900 million for the failed BankUnited, a large Florida thrift, purchasing it from the Federal Deposit Insurance Corp. in May 2009. He has taken stakes in ailing institutions such as Oregon’s Cascade Bancorp (CACB), New Jersey’s Sun Bancorp (SNBC), and the union-owned Amalgamated Bank in New York, all of which required his financial aid after writing down bad real estate loans. Ross has also looked abroad for bargains—and not just in England. In July he and four other investors spent $1.6 billion to buy 35 percent of the Bank of Ireland (IRE).
In the U.S., Ross argues that the smaller banks he has bought will outperform their larger competitors, such as Bank of America (BAC), which he sees as hobbled by their size and their need to comply with new regulations aimed at the mega banks. Richard Bove, a banking industry analyst, says Ross’s thesis is shrewd: “His timing is pretty good. I would expect he is going to do well.” Indeed, Ross says he and his fellow private equity stakeholders in BankUnited recouped their entire investment when they took the bank public in January 2011.
Across the Atlantic, Ross is buying larger banks. Ross says the plan for Northern Rock is to combine the traditional bank’s 75 branches with Virgin Money’s Internet operations. It’s a good strategy, says Howard Wheeldon, a senior strategist at BGC Partners (BGCP) in London. However, he says, Virgin Money and WL Ross got Northern Rock at a discount because of the inherent economic risks.
Ross says he paid 36 percent of book value for his stake in the Bank of Ireland, which he considers a steal. He believes Ireland will be among the first of the European countries to recover from the euro crisis and applauds its citizens for supporting austerity without taking to the streets: “There have been no riots, no picketing, no car burnings, no nothing.”
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