2nd Update: BankUnited CEO Kanas Returns To NY With $71.4 Million Deal

BankUnited Inc. (BKU) Chief Executive John Kanas is marching back into the New York market a year earlier than expected.

The long-time New York banker made his name building small Long Island-based North Fork Bancorp into a successful Manhattan lender that was eventually bought by Capital One Financial Corp. (COF).

Now he has a new foothold in the city, after Florida's BankUnited agreed Thursday to acquire Herald National Bank (HNB) for $71.4 million in cash and stock.

Herald National, which focuses on commercial banking for small- to mid-size businesses and high-net-worth individuals, has only three branches and will be viewed as just a first step by BankUnited.

BankUnited Chief Operating Officer Rajinder Singh said in the release it was "an important step toward expanding the reach" of the bank into New York.

A decade ago, Kanas was at the head of North Fork Bancorp and over six years the bank's deposits in New York more than quadrupled through acquisitions and aggressive expansion, leading to its buyout by Capital One in 2006.

Kanas repeatedly had said he wanted to reproduce his New York success with BankUnited in Florida, and he long had been expected to return to New York. But when Kanas left Capital One, he signed a non-compete agreement for New York that doesn't expire until 2012, a reason analysts were surprised a deal came so quickly.

Capital One wasn't immediately available for comment.

To come back, Kanas has returned to deal with an old friend, Herald Chairman and CEO Randy Nielsen. BankUnited initially will keep Herald as a separate subsidiary after the deal closes, expected in the fourth quarter, and Nielsen will remain its chief executive.

This is not the first time Kanas has bought a bank led by Nielsen. In 2000, North Fork closed on a deal to buy Reliance Bancorp, where Nielsen was chief executive at the time.

In 2009, Kanas took over BankUnited along with a group of investors including W.L. Ross & Co., Carlyle Group LP, Blackstone Group LP (BX) and Centerbridge Partners. The lender had collapsed under the weight of real-estate loans that went bad in Florida but it quickly turned into one of the more lucrative failed-bank deals for its investors.

The investors paid $945 million while the initial public offering, which priced in January, valued BankUnited at $2.6 billion.

Under the terms of Thursday's deal, Herald common and preferred stockholders will have the right to receive cash or BankUnited stock, in either case having a value equal to $1.35 plus the value of 0.0990 BankUnited shares. That puts the total value at $4.13 a share as of Wednesday's closing price.

Still, shares of Herald fell 4.6% to $3.94 Thursday after rallying nearly 9% Wednesday on a report of a possible deal. The shares have risen 52% in the past three months.

BankUnited shares slipped 1.2% to $27.78 in Thursday afternoon trading, and is now 2.9% above its IPO price of $27.

RBC Capital analyst Gerard Cassidy said he believes BankUnited is likely to grow in New York both through other acquisitions and organically, the same way Kanas built North Fork.

KBW analyst Brady Gailey said the timing of BankUnited's sudden leap into New York surprised him, but will give it a good start.

The deal "doesn't really do much to earnings per share," Gailey said. "But the larger thing is if they can get to New York 15 months ahead of schedule, they can start that growth engine a lot sooner."

-By David Benoit, Dow Jones Newswires; 212-416-2458; david.benoit@dowjones.com

--Matthias Rieker and Matt Jarzemsky contributed to this article.

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