NewStar Financial Inc. (NEWS:US), the business lender backed by private-equity firms Corsair Capital LLC and Capital Z Partners Management LLC, is exploring a sale, according to people with knowledge of the matter.
NewStar is working with Credit Suisse Group AG (CSGN) to solicit offers, said one of the people, who asked not to be identified because the process is confidential. Boston-based NewStar rose 13 percent to $17.76 today, its highest since February 2007, giving the company a market value of about $863 million.
Specialty lenders like NewStar, which makes loans to health-care, manufacturing and energy companies, typically charge higher interest rates, making them appealing targets for U.S. banks looking to increase profits. CapitalSource Inc. (CSE:US), which also lends to businesses, agreed in July to sell to PacWest Bancorp (PACW:US) for $2.3 billion.
“This company is a prime takeover target,” said Sameer Gokhale, an analyst who covers NewStar for Janney Montgomery Scott LLC in Philadelphia. NewStar will appeal to regional banks interested in expanding in commercial lending, said Gokhale, who has a “neutral” rating on the stock and a price target of $17.
Logical buyers include Jacksonville, Florida-based EverBank Financial Corp. (EVER:US), Miami Lakes, Florida-based BankUnited Inc. (BKU:US), and Wayzata, Minnesota-based TCF Financial Corp. (TCB:US), he said.
Robert Brown, a spokesman for NewStar, declined to comment, as did Credit Suisse spokesman Jack Grone and Robert Siegfried at Corsair. Spokesmen at Capital Z and the three regional banks didn’t immediately reply to requests for comment.
NewStar, with offices in nine U.S. cities, makes loans and leases of $5 million to $20 million to companies with annual sales of $25 million to $500 million, according to its annual report. The company had assets of $2.28 billion (NEWS:US) at the end of June, data compiled by Bloomberg show.
Along with other backers, Corsair and Capital Z, which each own close to 20 percent (NEWS:US) of NewStar, invested $210 million in equity and $450 million in debt to help start the company in 2004, according to a press release at the time.
PacWest offered about 1.47 times CapitalSource’s book value, in the cash-and-stock takeover that was announced in July. At that multiple, NewStar would be worth about $18.21 a share, based on its book value of $12.39 a share at the end of June, data compiled by Bloomberg show.
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