Talmer Bancorp in Troy, Mich., has paid billionaire backer Wilbur Ross $20 million to redeem warrants he has held in the company for several years.
The $6 billion-asset Talmer has transitioned from a private-equity-backed acquirer of failed banks to a public company focused on organic growth and strategic acquisitions, so "it is important for us to deploy our excess equity and simplify our capital structure," Chief Executive David Provost said in a news release Wednesday.
"This transaction is beneficial to our future diluted earnings per share as these warrants added 1.3 million shares to our average diluted common shares outstanding" in 2014, he said.
Most of the warrants were issued in April 2010 when Ross led a $200 million investment in the then-$90 million-asset First Michigan Bancorp.
The company used the investment to acquire the failed $900 million-asset CF Bancorp from the Federal Deposit Insurance Corp. In that deal, Ross received warrants to buy 1.6 million shares of common stock at an exercise price of $6 per share. Those warrants were redeemed at $8.30 each.
Ross team had committed $400 million to Talmer and in 2012 the company returned to draw the balance. Along with that draw, Ross was issued warrants to buy 906,000 shares of common stock at $8 per share. Those warrants were redeemed at either $6.97 each or $7.10 each, depending on when the warrants were issued.
The company funded the redemption through a $35 million line of credit it has with U.S. Bancorp. It is the first draw on the line and interest will accrue on the borrowing at an annual rate of 3% plus the one-month London interbank offered rate.
Despite the redemption, Ross remains a significant shareholder in Talmer. In a regulatory filing last week, Ross said he and his affiliates own 9.6 million common shares, or about 13.6% of the companys common shares outstanding.
"When Talmer approached us about the warrant repurchase, we agreed with management's rationale since the transaction allows the company to efficiently deploy their excess capital while being accretive to diluted earnings per share," Ross said in the press release. "This sale does not reflect any change in our enthusiasm for Talmer and its management team."
Denny Kim serves as a representative of Ross on Talmers board. The company said in a regulatory filing that Kim recused himself from all discussions related to the repurchase and did not vote on the transaction.