Great Western Agrees to Buy Citadel Holding
Great Western Financial Corp. has agreed to acquire Citadel Holding Corp., the besieged parent company of Fidelity Federal Savings & Loan Assn., through an exchange of stock worth more than $100 million, the companies announced Monday.
Under terms of the sale, Citadel Holding stockholders will receive 1.2 shares of Great Western Financial for each share they own of Citadel, the two financial institutions said. Although the agreement was decribed as “definitive,” it still must be approved by federal banking regulators and 75% of Citadel’s shareholders.
The agreement represents another move in the chess game between Citadel Holding and dissident shareholder Alfred Roven, a Los Angeles investor who controls 9.1% of the company’s shares and is waging a proxy fight against the current management.
Great Western Financial is a behemoth financial-services concern based in Beverly Hills whose principal subsidiary is Great Western Savings & Loan Assn., the state’s third-largest S&L.; Great Western Savings has $21.7 billion in assets and nearly 250 branches throughout California. Citadel’s Fidelity Federal, based in Glendale, is California’s 19th-largest S&L; with 29 branches in Southern California and $2.84 billion in assets.
The principal attraction of the sale is that it will allow Great Western Savings to fill in the holes of its branch network in Southern California and allow Citadel to ward off Roven. Executives at each company worked through the weekend to consummate the deal.
James Montgomery, Great Western’s chairman, said most Fidelity Federal offices will be converted to Great Western branches, though he added that “a handful will be disposed of.” He declined to be more specific.
Shareholder Roven was unavailable for comment. Terry Christensen, his attorney, suggested that the deal was inadequate because it involved an exchange of stock and not cash.
“We want price protection against variations in the market (price of Great Western’s stock),” said Christensen, the Los Angeles attorney who in recent years has spearheaded several S&L; stock fights on behalf of unhappy shareholders. “If the deal is fair today, the question is: Will it still be in three months?”
Great Western’s stock closed Monday at $28.375 per share on the New York Stock Exchange, off 25 cents. That means the current market value of the deal is $108.6 million, but the value will vary daily according to the price of Great Western’s stock. Citadel, with 3.19 million shares outstanding, closed at $30.75 a share, up $1.25, on the American Stock Exchange.
Great Western has the option to acquire about $400 million in adjustable-rate mortgages from Citadel if the sale should fall through. That clause was inserted as an incentive to “ensure the sale closes,” Montgomery said.
Financial analysts generally approved the sale, although the applause was less than deafening. “I consider it a modest plus” for both companies, said Thomas Klingenstein, financial analyst for Wertheim & Co. in New York.
However, the sale is a bitter pill for Spencer Scott, Citadel’s chief executive, who has been openly hostile toward Roven. In a phone interview, Scott said S&Ls; in California were interested in acquiring Citadel, but “none of them wanted to deal with Mr. Roven.”
Roven, who has been buying stock in Citadel Holding since last summer, now controls 289,300 shares, according to his latest ownership statement filed with the Securities and Exchange Commission. He paid an average of about $18 a share, Christensen estimated.
Roven is expected to press ahead with his proxy fight at Citadel’s annual meeting, scheduled for Wednesday morning in Burbank.
He is seeking two seats on the board of directors and the repeal of anti-takeover measures recently enacted by management.
Ironically, the anti-takeover provisions mean that three-quarters of Citadel’s shareholders must approve the sale instead of a simple majority, according to Ernest Leff, an attorney for Citadel.
Citadel Holding has several other major shareholders who have amassed sizable blocks of its stock.
One is Goldman, Sachs & Co., a New York-based investment banking firm that owns 9.7%, and another is Los Angeles-based Hecco Ventures, an investment partnership that owns 9.47%. Officials of both firms could not be reached for comment. CITADEL AT A GLANCE Holding company for Fidelity Federal Savings & Loan Earnings:
1984 $6.8 million 1st Quarter of 1985 $6.1 million
Data as of Dec. 31,1984
Assets: $2.84 billion Deposits: $1.93 billion Stockholders equity: $87.68 million As a percentage of assets: 3.08% Employees: 650 Branches: 29
