DealZone

Comeback kid?

August 12, 2008

federaltrust1.jpegJay Sidhu is back.

The former chief of Sovereign Bancorp has a tentative deal to invest $30 million in Federal Trust Corp and take control of the small Florida-based savings and loan. Federal Trust Bank operates 11 full-service offices and had total assets of $639.8 million as of June 30.

About two decades ago, Sidhu started down a similar path, when he took over as chief executive of Sovereign. By the time he left had transformed a $400 million Pennsylvania thrift into a regional bank with some $89 billion in assets and 800 branches, stretching from Maryland to Boston. Under Sindhu, Sovereign acquired more than two dozen banks and branch networks divested by bigger banks.

But Sidhu, who stepped down from the bank in 2006, was also a magnet for criticism. Disgruntled investors complained about Sovereign’s stagnant share price, and his agreement to sell a minority stake to Spain’s Santander and simultaneously buy Brooklyn, New York’s Independence Community Bank Corp.

Critics also decried Sovereign’s corporate governance, accusing Sidhu of controlling his board by granting directors exorbitant pay and lucrative inside deals.

The New Delhi native has apparently been planning a comeback. He controls Sidhu Advisors, an investment vehicle. And in March, he filed with regulators for an IPO of Sidhu Special Purpose Capital Corp, blank-check company, to raise up to $150 million.

If past is prologue, he’ll use Federal Trust as a platform for acquiring more banks. And along the way, he’ll no doubt attract some pointed criticism.

(Photo credit: Federal Trust logo from PR Newswire)

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