Ford Motor to Acquire First Nationwide for $493 Million in Cash

In a deal affecting giants in three separate industries, Ford Motor has agreed to buy First Nationwide Financial for $493 million in cash, it was announced Thursday.

About 81% of First Nationwide’s stock is owned by National Intergroup, a Pittsburgh-based holding company that owns 50% of National Steel. The other 19% of First Nationwide is publicly held.

The acquisition promises to make Ford a leviathan in the field of financial services, in addition to being the country’s second-largest auto maker.

First Nationwide is expected to operate closely with Ford Motor Credit Co., the auto maker’s finance arm. Between them, the two operations will have about $38 billion in assets.

The deal calls for Ford to pay $32 per share for all 15.4 million of First Nationwide’s shares, double the $16 price of four months ago when the San Francisco-based company began trading on the New York Stock Exchange. First Nationwide’s book value--its assets minus its liabilities--is $24.19 a share.

National Intergroup will receive $401 million for its shares, also a hefty gain over the $241 million that it paid for the financial institution in 1980. National Intergroup wants the money to pursue its diversification.

Unusually Heavy Trading

The deal must be approved by the Federal Home Loan Bank Board and other regulatory agencies, but officials at all of the companies expressed confidence that the sale will be completed by year-end.

News of the sale was not unexpected, largely because National Intergroup said Monday that it was looking for a buyer for its financial-services subsidiary, an announcement that was sparked by unusually heavy trading in First Nationwide’s stock.

Speculation immediately centered on the auto companies as likely buyers, and Ford emerged Wednesday as the leading contender.

For First Nationwide and National Intergroup, the sale amounts to a friendly divorce between two companies that liked each other well enough but had trouble living under the same roof.

“I personally regret having to make this decision, but there is far more synergy for First Nationwide as a partner of Ford than there could be with NII,” National Intergroup Chairman Howard Love said in a statement.

Ford officials announced the sale at a news conference in Detroit, where they issued a statement from Chairman Donald Petersen and President Harold Poling saying that the move was “part of Ford’s plan of . . . developing new sources of earnings” and “expanding into complementary businesses that have a record of, and prospects for, substantial growth.”

Competitor of Sears, Citicorp

First Nationwide Chairman Anthony Frank said the purchase fits well with his company’s goal of becoming a leading provider of financial services to the American middle class--a move aimed at putting First Nationwide in the same league as Sears, Roebuck and Citicorp.

“We’ll have a couple of million customers between us,” Frank pointed out in a phone interview.

Although the two companies will operate as independent subsidiaries, First Nationwide will buy Ford Credit’s customer finance contracts, Frank said. That will provide the savings and loan with relatively short-term assets of two to three years that will help it to offset its maturing deposits.

National Intergroup acquired First Nationwide because it thought the S&L; company would provide a steady stream of earnings. It is selling the financial institution five turbulent years later just as First Nationwide is starting to post big gains in its profits.

First Nationwide has just concluded the best six-month period in its 100-year history, earning $29.4 million in the period ended June 30.

“I was always taught you sell at the top of the market, and that’s what we’re doing,” a National Intergroup spokesman said.

First Nationwide’s principal subsidiary is First Nationwide Savings, whose $9.5 billion in assets rank it among the 10 largest savings and loans in the country. It has 180 branches in California, Hawaii, New York and Florida. It also has a consumer finance company based in South Carolina that has 144 branches in seven states in the Southeast.

And it has a nationwide franchise system that offers advertising and lending assistance to 23 financial institutions in 20 states, as well as real estate development operations that make it one of California’s largest home builders.

Changing Image

Frank will report to James W. Ford, who heads the auto company’s finance and insurance operations. Although he said that he doesn’t expect to become a member of Ford’s board, he noted that he will remain as a director of National Intergroup.

The cash from the sale should help National Intergroup change its image.

“We have said over and over that we are looking for acquisitions that are not capital intensive, not labor intensive and not affected by imports,” a National Intergroup spokesman said. “We’re not looking for a steel company.”

National Intergroup sold a 50% interest in National Steel to a Japanese steel company, Nippon Kokan K.K., last August for nearly $300 million and, later in the year, announced that it would merge with Bergen Brunswig, a Los Angeles-based drug distribution company. But the merger agreement fell through in April.

Times staff writer Stephanie Droll, in Detroit, contributed to this story.