Citadel Tries to Fend Off Assault by Dissidents, Speculators
Spencer Scott is under attack in Glendale. The 62-year-old chairman of Citadel Holding Corp., parent of Glendale-based Fidelity Federal Savings & Loan Assn., said he is trying to protect his firm from dissident shareholders and Wall Street speculators seeking a quick profit at his institution’s expense.
Since late January, four groups have filed statements with the Securities and Exchange Commission revealing that they each own more than 5% of Citadel’s 3.2 million shares outstanding. None of the investors professes interest in taking over the healthy but unspectacular $2.9 billion S&L;, the state’s 18th largest.
Worried About Intentions
But Scott is worried about their intentions nonetheless, especially those of Los Angeles investor Alfred Roven, who started the stampede in Citadel shares last summer and now holds a 9.1% stake.
“Mr. Roven does not want to run an S&L;, nor do any of the others,” Scott said. “Roven wants to spearhead a sale of the association. He basically is an arbitrageur. And when you get someone like that on your case, others climb on the bandwagon.”
Arbitrage is the short-term buying and selling of securities to take advantage of price variations in different markets. Citadel stock has been on a generally upward trend since last spring, when it was trading for about $12 a share. It closed Friday in trading on the American Stock Exchange at $28 a share.
Strong Earnings
Strong first-quarter earnings announced earlier this month could spark further interest in the S&L; firm. The company reported profits of $6.1 million for the first quarter, more than quadrupling its results from a year ago. The $6.1 million is nearly as much as Citadel made in each of the previous two years.
Proxy Fight Begun
Roven recently began soliciting votes in a proxy fight over several company actions designed to thwart a hostile takeover, protect the jobs of Scott and President Gerald Barrone and block “greenmail” repurchases of Citadel stock. Scott said the board has not acted on an anti-greenmail proposal but that management and the board are adamant about not rebuying Citadel stock at a premium.
“We don’t intend to buy back their shares,” he said. “We’re in the business of creating net worth, not destroying it.”
A Roven spokeswoman said he was interested only in “maximizing the value of the shares.”
Reached Compromise
Citadel already has reached a compromise with Hecco Ventures, which owns 9.47% of the firm’s stock, under which management will support a Hecco candidate for the board in exchange for a hands-off stance by the investor group.
Hecco is an investment partnership directed primarily by Los Angeles movie theater executives Michael R. Forman and James J. Cotter, who declined to elaborate on their holdings.
Hecco’s chief concerns, according to its SEC filing, were anti-takeover provisions in Citadel bylaws and the granting of “golden parachute” employment contracts to Scott and Barrone. The company’s bylaws bar a takeover by a firm in an unrelated business until 1987, a measure taken shortly after Citadel converted from a mutual savings association to a publicly traded stock corporation in 1982.
Scott acknowledged that he and Barrone had contracts protecting them in the event of a takeover, but said the terms were not out of line with industry norms.
Other Major Holdings
Two Wall Street investment houses--Goldman Sachs & Co. and Lafer Amster & Co.--also have substantial Citadel holdings. In late February, Lafer Amster said it had acquired 8.5% of the firm’s shares and Goldman Sachs revealed a 7.4% stake in the company. Both said the shares had been brought on the open market “in connection with arbitrage and other activities in the ordinary course of business.”
Although the friendly takeover of Citadel at an advantageous price by a “white knight” appears to be Roven’s aim, no buyer is on the horizon, according to Scott, independent analysts and a Roven associate.
“Nobody’s made an offer,” Scott said. “We don’t want to be forced to sell under pressure or duress at a price that’s not fair to all shareholders.”
Chose Not to Discuss
Roven chose not to discuss his Citadel holdings. Joy Martin, an official of American Underwriters Inc., a Roven-controlled investment firm, said: “He really feels all his plans and intentions have been stated in the 13Ds. We’re just trying to maximize the value of the shares.”
(The 13D is a document that anyone acquiring 5% or more of the stock of a company is required by law to file with the Securities and Exchange Commission.)
She said she knew of no current candidates for a Citadel purchase.
Roven is a controversial investor and financier who has run afoul of the SEC twice in recent years.
In August, 1982, he signed a consent agreement with the SEC promising to refrain from all violations of securities purchase laws. He neither admitted nor denied charges that he and several associates had engaged in an illegal scheme to finance large securities transactions through banks in Los Angeles and New York.
Second Stipulation
Later that month, he signed a second stipulation with the SEC relating to the purchase of a 17% stake in Financial Federation Inc., a savings and loan holding company based in Culver City. The SEC had accused Roven, Los Angeles hotelier Severyn Ashkenazy and two associates of illegally hiding their joint ownership of the stock.
Again without admitting guilt, Roven promised to abide by all SEC disclosure rules in the future.
Analysts say Citadel’s stock probably has peaked and even a legitimate purchase offer would not markedly increase its value.
“They’re a fairly average company,” said Allan Bortel, a thrift analyst with Shearson Lehman Bros. “We don’t think the sale price is a whole lot higher than where it’s currently selling.”
Ernest Leff, a Los Angeles S&L; attorney who has represented Citadel, agreed.
“Even if it were to sell, it’s doubtful it would sell for more than book (about $27 a share). It’s pretty close now to maximum price.
“I think there’s a fair chance a lot of arbitrageurs are going to get hurt on this one. They’re in for the quick buck and I don’t think Mr. Roven is going to achieve his objectives in the short term.”
CITADEL HOLDING CORP. AT A GLANCE The firm is parent of Fidelity Federal Savings & Loan Assn., Glendale
1984 1983 1982 Assets $2.84 $2.20 $1.74 billion billion billion Deposits $1.92 $1.45 $1.30 billion billion billion Net income $6.8 $6.8 ($17.1 (loss) million million million)
