Fremont General Corp., said on Tuesday it had agreed to sell its commercial real estate lending business to iStar Financial Inc. for about $1.9 billion, sending its shares soaring.
Fremont also said it had agreed to sell a minority stake in the entire company to an investor group led by Gerald Ford, the former chief executive of Golden State Bancorp Inc., for about $80 million in the form of preferred stock and warrants to buy more common shares.
The deal could eventually lead to the investor group owning 20 percent of the outstanding stock of the company, one of several lenders to less credit-worthy home buyers who have scrambled to overcome rising defaults and late payments amid a U.S. housing slowdown.
Santa Monica, California-based Fremont also said the buyer in its previously disclosed agreement to sell its subprime residential real estate business was hedge fund Ellington Capital Management.
Ford will become the bank’s chairman and two other former Golden State executives, Carl Webb and Randy Staff, will be named chief executive and chief financial officer of the bank, respectively.
Golden State was sold to Citigroup in 2002 for $5.8 billion.
IStar, which provides investment capital to real estate owners, also agreed to acquire 70 percent of Fremont’s commercial real estate net loan portfolio and fund up to about $4.4 billion in existing unfunded loan commitments associated with Fremont’s portfolio of commercial loan assets.
IStar said it expects the acquisition to be accretive to its fiscal 2007 earnings per share in the range of 10 to 20 cents.
As part of the deal, iStar will retain the majority of Fremont’s commercial real estate employees, who work in eight locations across the country, and integrate them with its existing 200-person team.