Investment Banking Firm Stalls Deal With Great Western : Acquisition of Citadel Hits Snag

Great Western Financial Corp.’s planned $109-million acquisition of Citadel Holding Corp. has been put on hold by an investment banking firm’s refusal to issue an unqualified opinion supporting the deal, Citadel officials said Friday.

“It’s not canceled, but it’s at a standstill until something happens. Something’s got to give,” said Spencer Scott, chairman of Citadel, parent of Glendale-based Fidelity Federal Savings & Loan Assn.

Scott would not say specifically what it would take to revive the deal or when the current problems might be resolved.

The New York investment firm of Salomon Bros. is advising the two financial firms on the merger. The merger agreement, first announced in May, requires a positive opinion from Salomon Bros. regarding the fairness to shareholders of a stock swap proposed to finance the deal.

Salomon Bros. said Friday that the exchange ratio was fair to shareholders “as of July 18.” The firm refused to elaborate.

Problems Found

Scott said, however, that the opinion “wasn’t broad enough” to justify proceeding with the merger and that the investment bankers had “found some problems” with the transaction.

Great Western, the Beverly Hills-based parent of Great Western Savings & Loan Assn., said in a statement that it intends to go forward with its acquisition plans. But it said that, if the merger falls through, it will exercise its option to acquire up to $400 million of Citadel’s adjustable-rate mortgage loans.

Meanwhile, Citadel said it settled a lawsuit with a dissident shareholders group and accepted several corporate bylaw changes sought by the group, headed by Los Angeles investor Alfred Roven.

Earlier this month, Roven and two of his associates were named directors of Citadel in an apparent attempt to resolve their opposition to the merger. Citadel also agreed to pay certain expenses incurred by the dissidents.

Friday’s actions stalling the merger plan were a “vindication of his (Roven’s) questions and concerns about the agreement,” said Terry Christensen of the Century City law firm of Wyman, Bautzer, Rothman, Kuchel & Silbert, which represents the Roven group.