Detroit — What might have seemed counterintuitive to the rest of the M&A world — investing almost $50 million in a single-branch bank in Michigan in 2010, as banks around the country were dying as a result of the Great Recession — made all the sense in the world to New York financier Wilbur Ross Jr.
Investors like to say they bet on horses, and David Provost and Gary Torgow were the horses on which Ross put his money.
“We didn't think Michigan was going to zero, which was the prevailing wisdom at the time. And we believed in Dave and Gary,” Ross said during a Feb. 16 event for Crain's Detroit Business' Biggest Deals event in Detroit. CDB is a sister publication of Plastics News.
“Banking is the most management-intensive business in the world, and we believed in their management."
The little bank in Troy, Mich., then called First Michigan Bank, had $75 million in assets. Renamed to better expand in the Midwest to Talmer Bancorp Inc., it did a series of acquisitions of failed banks in Michigan, Wisconsin and Ohio, had an initial public offering in 2014 and grew its assets to $6.5 billion.
In January, Talmer announced it was being acquired for $1.1 billion by Midland-based Chemical Bancorp Inc., a deal described as a merger of equals that is aimed to allow more acquisitions and a much larger regional footprint.
Ross spent 24 years at Chicago-based Rothschild Investment Corp., a worldwide investment bank, first running its bankruptcy business and then running its private equity fund, which he bought in 2000 to launch New York City-based W.L. Ross & Co. LLC with $440 million in assets under management.
Investing in 2010 as part of First Michigan Bank's $200 million capital raise was hardly Ross' first contrarian play.
“Is Wilbur Ross crazy?” read the headline of an article in BusinessWeek in 2003, just after he had bought a sprawling, nearly idled steel plant in Cleveland and long-struggling Bethlehem Steel.
Walsh read to the crowd a quote from that article:
“‘Ross is a collector of the junked, the unloved, the wretched refuse of an economy that has mostly given up making things in favor of buying them elsewhere.'"
It paid off. Today, W.L. Ross & Co. has about $9 billion under management and Ross is listed by Forbes as having a net worth of $3 billion, ranking him No. 554 in the world and No. 194 in the U.S.
Ross said he'd already been familiar with Michigan, having formed International Automotive Components Group in Southfield, Mich., in 2005 in a joint venture with Lear Corp. to buy its interior trim business, one of the biggest molders of automotive plastics in North America.
“Lear paid us to take over the assets,” he said. “You always have trepidations when you are doing a deal, but I felt better they were paying me money.”
Why did he get into the supplier business, then, a troubled time for local suppliers?
“I felt the industry was ready for a roll-up. It was a huge market overpopulated with companies that was ready for a roll-up and shakeout,” he said. “Eventually, I bought 15 companies. Unfortunately, I had to pay for most of them.”
Walsh asked him about a possible IPO for IAC. One had been planned for 2014 and then pulled off the table.
“You know, the SEC gets itchy about that. We're happy to have Steve Miller running it,” Ross said.