UPS Acquires Bank: The Niche Get 'Nicher'

Capping a two-year push into e-commerce, United Parcel Service-through its financial services subsidiary, UPS Capital-has acquired First International Bank, which specializes in government-backed industrial loans. The deal, valued at $78 million, gives UPS entree into the business-to-business (B2B) e-commerce sector, in which First International has carved out a niche.

First International offers loans of up to $10 million to small and medium-sized manufacturers, distributors and wholesalers (annual sales of $1 million to $50 million) in the United States and emerging markets abroad. About two-thirds of its $1.2 billion loan portfolio is guaranteed by U.S. or other government agencies, such as the Small Business Administration and the Export-Import Bank. What attracted UPS, however, were First International's ties to nascent B2B e-markets such as e-Steel and Online Asset Exchange, for which it provides trade credit (see story, page 16).

"Our strategy has been to identify industrial e-business marketplaces-approaching them for alliance and integrating our credit offerings into those marketplaces," said Brett Silvers, chairman and CEO of Hartford, Conn.-based First International. That strategy stands in contrast to that of larger banks, which have designated themselves "go-to portals," he said.

First International, which will retain its identity, stands to benefit from UPS' access to logistics information, which will help First International make credit decisions faster. "By controlling the flow of product, UPS brings the information one step closer to the financial decision making process," said Silvers.

UPS decided two years ago to offer complementary financial services like equipment financing, logistics financing and global trade finance. First International adds deal-making savvy and technological expertise to this mix, said Bob Bernabucci, president and CEO of Atlanta-based UPS Capital. "First International has done a good job of understanding how the Internet and e-commerce apply within trading networks."