THIS IS WHAT HAPPENS WHEN YOU HAVE TO SELL NEAR THE BOTTOM OFF THE CYCLE
From the standpoint of sheer dollars forgone, BofA’s sale of First Republic in 2010 isn’t close to its worst deal of all time. Still, this was one colossal bungle:
Few objected when Bank of America chose to sell First Republic Bank in 2010 for $1.86 billion to a group that included existing management and buyout firms Colony Capital and General Atlantic, though clearly this is a deal the beaten up banking giant wouldn’t mind having back.
Less than six months after making their acquisition, First Republic’s buyers took the bank public at a value of $3.27 billion. Since then, the shares have run up another 21%, while Bank of America shares are down some 30% over the same period of time. As of Friday’s close, First Republic had a market cap of $4.4 billion. [Emph. added]
So the bank sold for $1.86 billion a unit that would be worth $3.27 billion just six months later. It’s true of course that BofA didn’t have much choice in the deal’s timing and was forced into a quickie sale. Still that’s got to hurt down in Charlotte. . . .