First Interstate Official, KKR to Form Venture
The chief financial officer at First Interstate Bancorp resigned Monday to form a company that will acquire ownership of banks and thrifts with financial backing from Kohlberg Kravis Roberts & Co., the New York leveraged buyout specialists.
KKR, which is participating in the record bidding for RJR Nabisco, is one of the most influential financial firms in the country. It controls a string of companies through a series of increasingly larger leveraged buyouts, known as LBOs.
In these deals, public companies become private concerns when outstanding shares are purchased by private investors with borrowed funds. The debt is later paid off from the company’s own cash flow or by selling off its assets.
The transactions have become increasingly controversial because some companies have to lay off workers and sell divisions in the struggle to pay their debts.
Successor Named
The new venture with Don M. Griffith, an executive vice president at First Interstate, will mark KKR’s first foray into acquiring financial institutions. KKR’s reputation and ability to obtain financing will automatically make the new firm a major player in the growing arena of acquisitions of financial institutions by private investors.
Griffith is the second top First Interstate official to announce his resignation in recent days, but bank officials and outside analysts said the timing was only a coincidence. Last Thursday, Alex W. (Pete) Hart, head of consumer banking, resigned to become president of MasterCard International. Thomas P. Marrie, chief financial officer of First Interstate Bank of California, the holding company’s principal subsidiary, was named to replace Griffith.
Griffith, 45, stressed in an interview that his still-unnamed investment firm will not engage in hostile acquisitions or LBOs. He also acknowledged that LBOs are unfeasible for banks because federal regulators will not allow them to be acquired with debt.
“We will be there on a friendly basis to provide capital and a high degree of financial engineering,” Griffith said.
The new firm will search for opportunities to acquire 100% of banks and savings and loans and to make substantial investments in financial institutions in tandem with existing or new management.
KKR’s commitment of cash to the new investment firm will be determined by the size and quality of the deals that Griffith turns up, he said.
Griffith will leave his $395,000-a-year post at the Los Angeles-based banking company in early January. The new firm will be located in Los Angeles, but he said he will search for investment opportunities across the country.
