Great Western Renews Bid to Acquire Citadel : Proposes Stock Exchange Valued at $145 Million

Great Western Financial Corp. said Thursday that it has renewed its bid to acquire Citadel Holding, parent company of Fidelity Federal Savings & Loan Assn., through an exchange of stock worth $145 million.

Great Western said it plans a tender offer for all outstanding shares of Citadel, setting the stage for what may turn into a takeover battle between two Southern California-based savings and loan companies that have been feuding openly for months.

Citadel officials could not be reached for comment. But attorney Terry Christensen, representing Alfred Roven, a director and major shareholder of Citadel, termed the move “just another attempt by Great Western to bully Citadel.”

Great Western’s move is the latest chapter in a courtship-gone-awry that began last May when the two companies announced a definitive agreement to merge.

In the ensuing months, the merger went on the rocks because Citadel’s investment banker declined to endorse the deal, Citadel Chairman Spencer Scott resigned suddenly for undisclosed reasons, and Great Western filed suit, charging Citadel with violating terms of the merger pact.

Now Great Western says it is planning a tender offer for Citadel’s about 3.5 million outstanding shares of common stock. Terms of the offer call for Citadel shareholders to receive 1.2 shares of Great Western stock for each share they own of Citadel.

Value Has Increased

Great Western confirmed that it decided to proceed with a tender offer after it failed to get Citadel to agree to revive the old merger agreement. The terms of the two offers are identical, but the value of the proposed deal has gone up about $36 million because of appreciation in Great Western’s stock.

Great Western’s stock closed Thursday at $34.625, up 12.5 cents a share, while Citadel’s shares closed at $39.75, up $1. Most of Citadel’s shares are believed to be held by professional stock traders, known as arbitrageurs, who bought the stock anticipating that it would rise in value because of the merger.

Jonathan Gray, financial analyst at Sanford C. Bernstein & Co. in New York, said the deal “appears to be reasonable for Citadel’s shareholders. If you’re going to receive anyone’s stock, Great Western’s is the one to have.” On Wednesday, Great Western reported record earnings of $202 million.

Christensen, however, suggested that the offer is inadequate and noted that “it looks like” a takeover battle is in the works. “We’re simply saying we’re going to be victimized by Great Western,” he said.

Displeased by Remarks

“I think Mr. Christensen’s remarks are unfortunate,” said Great Western spokesman Clifford A. Miller, also a company director. “Great Western is simply saying we want to finalize a transaction that has already been agreed to by both companies.”

Great Western said it wanted the merger because of Citadel’s extensive branch office network in Southern California and its large portfolio of adjustable-rate mortgage loans. Miller noted that the merger can be consummated quickly because it has already been approved by federal savings and loan regulators.

If the tender offer is successful, Great Western will add about $3 billion in assets and 29 branch offices to its already formidable holdings. Based in Beverly Hills, Great Western has assets of $25.5 billion and about 250 branch offices throughout California.