Glendale Federal Agrees to Buy Armco Financial

Glendale Federal Savings & Loan Assn. said Monday that it has signed a letter of intent to buy the commercial finance subsidiary of Armco Inc., an ailing steelmaker based in Middletown, Ohio.

Glendale Federal will pay between $60 million and $70 million in cash, which is about book value, for Dallas-based Armco Financial Corp., said Keith Russell, Glendale Federal senior executive vice president and general manager of subsidiaries. The exact price will be determined by an outside audit that is expected to be completed around March 1, he said.

The purchase will allow Glendale Federal to expand its range of financial services, increase its wholesale business income and reduce the company’s sensitivity to interest-rate changes and real estate cycles, Russell said. About 75% of Armco’s portfolio is composed of loans with floating interest rates, he said.

“We think Armco Financial is a very well run commercial finance company with a strong portfolio,” Russell said.

The sale is part of Armco’s plan to dispose of its financial-services operations, which include Armco Financial and property and casualty insurance businesses, so that the company can focus on its steel operations. Armco has suffered losses of more than $1 billion since 1982. For the nine months ended Sept. 30, 1984, Armco lost $230.5 million on revenue of $3.4 billion.

Armco Financial, which has assets of about $400 million, had net income of $5.4 million on revenue of $50.3 million for the nine months ended Sept. 30. However, if Armco Financial had been an independent company and didn’t have access to its parent company’s tax credits, net income for the nine months would have been $2.5 million, an Armco spokesman said.

Armco Financial, which has seven offices and about 120 employees, will maintain its base in Dallas.

Glendale Federal already has a commercial finance subsidiary called Glenfed Capital Corp., formed in late 1983. Glendale Federal is the nation’s fifth-largest S&L.;