Lewis S. Ranieri, the father of the mortgage-backed securities industry, is cashing in his chips and getting out of the thrift business.
He and other investors at Hyperion Partners, Mr. Ranieri's Long Island- based investment firm, are selling the voting shares in Bank United of Texas to the public, according to a Securities and Exchange Commission filing. The offering could be scheduled as early as this week, pending regulatory approval.
The filing also said Bank United was considering the sale of part or all of its mortgage banking business. The thrift already has been reducing its emphasis on residential lending.
Industry sources said the offering should yield about $100 million. The money will be divided among the current owners of the thrift's holding company - Mr. Ranieri, his investment partners, and three other unnamed investors. Hyperion also received a dividend of $100 million from Bank United in May.
The Hyperion owners will continue to hold nonvoting shares that automatically convert to voting shares when they are sold. These shares initially will be worth another $100 million.
Mr. Ranieri will remain chairman, but is relinquishing the titles of president and chief executive. He declined to comment on the offering while the company is in the quiet period following an IPO filing.
Industry observers said the move may signal a lack of confidence in the thrift industry on Mr. Ranieri's part.
"He's making a call on the potential long-term prospects for the business," speculated Gareth Plank, an equity analyst at UBS Securities, San Francisco. "Clearly, the financial objectives he was looking for were met and exceeded there."
Thrifts are currently trading at "uncharacteristically high multiples," Mr. Plank said, making this an ideal time to bring a thrift public.
Traditional thrifts have struggled recently, competing with commercial banks of national recognition and stores of capital to make mortgages, one thrift executive said.
"The mortgage business is expensive to be in," said Sam Lyons, senior vice president of mortgage banking at Great Western Bank, a Chatsworth, Calif.-based thrift.
Recently, Bank United has gotten away from the traditional thrift line of business - mortgage banking - which has suffered shrinking profit margins. It has bolstered lines of business with higher profits, like commercial and community banking. The company is currently "evaluating strategic alternatives with respect to its mortgage banking business, including a sale or restructuring of all or part of its mortgage origination business," according to the filing.
Industry investment bankers said Bank United tried unsuccessfully to sell the entire company in 1993.
"The multiple he'll (Mr. Ranieri) get in the public market is what a private investor would pay for a true franchise company," one banker said. The banker said there is some suspicion among private investors about how well Bank United is moving into businesses other than mortgage lending, adding that private investors currently are not paying high premiums for mortgage companies.
Joseph Bryant, executive vice president of mortgage banking at Long Island Savings Bank, said he does not think the sale will be Mr. Ranieri's final exit from the mortgage business.
"He has done an incredible job with Bank United, and this would be an indication that he has some substantial plans up his sleeve," Mr. Bryant said. "It will be interesting to see what happens." The filing stated that Mr. Ranieri may stay at the bank as a consultant for three years.
The bank had $11.3 billion of assets as of March 31 and total deposits of $5.0 billion.
Bank United has established some takeover defenses. It will be able to issue preferred stock without prior shareholder approval, and the nonvoting shares can be converted to voting shares by the holders.
Barry C. Burkholder, president and chief executive of the bank who runs daily operations, will become chairman of the bank's board of directors after the offering. He also will become president and chief executive of the bank holding company.
Since June 1995, 89 savings and loans have gone public. Of those, 14 had more than $500 million of assets, according to SNL Securities, Charlottesville, Va.
Underwriters for the sale are Merrill Lynch & Co., Lehman Brothers, and Smith Barney Inc.
