Spain’s Grupo Santander, the euro zone’s largest bank by market capitalization, announced a $1.15 billion deal on Friday to sell a 35 percent stake in its automotive financing unit in the United States to a group of private equity investors, as it looks to shore up its balance sheet.
Under the terms of the agreement, Kohlberg Kravis Roberts, Centerbridge Partners and Warburg Pincus will invest a combined $1 billion for a 25 percent share in Santander Consumer USA. Dundon DFS will pay $150 million for a 10 percent stake in Santander Consumer USA.
“Following the transaction, Santander will realize a capital gain of approximately $1 billion,” the bank, which is based in Madrid, said in a statement. “The capital gain will be fully allocated to reinforce the group’s balance sheet.”
According to regulatory filings, Santander’s core tier-1 ratio – a crucial indicator of a bank’s overall financial health — stood at 7.1 percent in 2010.
Santander, which will retain a majority stake in its United States consumer financing division, went on an acquisition binge during the financial crisis.
In 2008, the Spanish bank bought the Philadelphia-based Sovereign Bancorp for $1.9 billion. That followed other global deals, including the acquisition of Britain’s Alliance Leicester for $1.9 billion and Brazil’s Banco Real for $1 billion.
Yet the deteriorating economic situation in its home market has begun to take its toll. According to the European Union, more than one in five of all Spaniards is unemployed.
That has hit Santander’s domestic operations as people struggle to meet their mortgage payments and companies can not meet their debt obligations. In the first half of 2011, the bank’s net profit fell to $5 billion, a 21 percent drop compared with the same period last year.
The automotive financing group in the United States has been a point of strength for Santander. The unit, based in Fort Worth, Tex., has been rapidly expanded its financing operations across the country, and reported an annual net profit of $455 million last year.
Deutsche Bank and Barclays Capital advised Warburg Pincus, K.K.R., Centerbridge Partners on the deal.
Article source: http://dealbook.nytimes.com/2011/10/21/santander-to-sell-stake-in-u-s-auto-financing-group/?partner=rss&emc=rss
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