It is good to be king - of the Chicago banking market that is. After agreeing to a $21 billion cash buyout by Bank of America Corp., LaSalle Bank Corp.'s parent company reportedly received a substantial competing bid of $98.1 billion from a consortium of banks led by the Royal Bank of Scotland.
News of the RBS group's bid for ABN Amro came weeks after it agreed to be bought out by Barclays, and as the banking industry was assessing the benefits of a union between LaSalle and Bank of America.
Bank of America Corp.'s fixed-income investment banking unit is on a roll for 2007. After the investment banking unit closed out the first quarter as the top lead underwriter on reported public ABS deals, according to the ASR Scorecard database, the bank now seems positioned to snatch a decisive lead in the commercial mortgage-backed securities league tables as well.
According to preliminary data from the ASR Scorecard database, LaSalle Financial Services held the top slot as lead underwriter for commercial MBS deals in the first quarter, managing about $9 billion of deals for a 40% share of the CMBS market. Banc of America Securities, meanwhile, came in six places behind LaSalle, with $3.1 billion in mandates. Granted, the Scorecards initially gave banks full credit for co-lead managed transactions, but that does not diminish LaSalle's accomplishments as an originator of CMBS deals, according to industry participants.
"Banc of America and LaSalle are equally well regarded. What they are good at is the origination and underwriting of loans," a source said of LaSalle. He added that Banc of America Securities did have one edge over LaSalle, which is that it has a strong dealer presence. LaSalle has historically relied on banks such as Citigroup Global Markets, Morgan Stanley and other dealers to get its securitized loans to the market, whereas RBS Greenwich Capital normally teams up with Goldman Sachs for its deal distribution, said one industry observer.
Whom LaSalle Bank ends up with is likely to be a hotly debated and complex question. At press time, word circulated that a group of banks, led by RBS was considering a takeover and split-up of LaSalle. The group included Banco Santander Central Hispano of Spain and the Belgian-Dutch bank Fortis NV. RBS wants LaSalle Bank's U.S. operations, Fortis is interested in its Netherlands and Belgian business, and Banco Santander is eyeing its workings in Brazil and Italy. Such a scenario is less favorable in some banking circles because of feared geographical overlap and job losses, according to press reports.
For its part, Bank of America Corp. stipulated that if a rival bid for LaSalle Bank is submitted and it does not match the competing offer, then it would receive a $200 million breakup fee.
Bank of America Corp. says it plans to buy out LaSalle Bank in a cash deal worth $21 billion, a move that could make it the third-largest banking company in the U.S., and give it a much-sought-after chance to become a large banking player in the Chicago market. Indeed, with $113 billion in assets, LaSalle Bank Corp. is Chicago's largest bank holding company. Historically, LaSalle excelled in commercial banking and was especially strong in Chicago and Michigan, and the merger gives Bank of America its initial entry into the Detroit metropolitan market. Its $43 billion commercial portfolio consists of about $23 billion in commercial middle-market credits, $14 billion in commercial real estate, $4 billion in asset-based lending and $2 billion in commercial leases, according to a report from Davenport Equity Research. If successful, the Bank of America buyout would close in late 2007 or in 2008.
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