Great Western Suit Claims Citadel Broke Merger Pact
Great Western Financial Corp. has filed suit against Citadel Holding Corp., claiming that Citadel broke a merger agreement between the two California savings and loan companies.
The suit appeared to signal that the problem-plagued merger had hit a fatal snag. Just a month ago, Citadel executives indicated that the deal was still alive but stalled by the company’s inability to get an investment banking firm’s unqualified opinion supporting the merger.
Great Western, the Beverly Hills-based parent of Great Western Savings & Loan Assn., said in its suit that Citadel and Alfred Roven, a Los Angeles investor recently elected to Citadel’s board of directors, violated the agreement announced May 20 for Great Western’s acquisition of Citadel.
Citadel is the holding company for Fidelity Federal Savings & Loan Assn., based in Glendale.
The suit, filed Monday in Los Angeles Superior Court, asked the court to order the $109-million acquisition to proceed.
It said that the merger had been derailed by a costly and bitter proxy fight waged by Roven and that Citadel was using its investment bankers’ refusal to endorse the deal as a “sham and a pretense” to back out of the merger. Citadel and Great Western officials declined to comment on the suit. But Roven’s attorney, Terry Christensen of the Century City law firm of Wyman, Bautzer, Rothman, Kuchel & Silbert, called the suit “a desperate action.”
“They are completely wrong. The agreement is grossly unfair to Citadel shareholders. Fred Roven expressed doubts all along about this deal, but he didn’t break it up single-handedly,” Christensen said.
One of the central issues in the dispute was a provision in the merger agreement that, if the deal fell through, Great Western would have the right to buy $400 million worth of Fidelity Federal’s adjustable-rate mortgages for a nominal fee. Sources indicated that, when the Citadel board determined the true value of the mortgages, it killed the deal.
Great Western demanded in the suit that the mortgage transfer take place even if the merger agreement is terminated. It also asked $10 million in punitive damages.
