Citadel Sues to Block Offer by Great Western : Starts Legal Battle in Federal, State Courts
Citadel Holding, parent firm for Fidelity Federal Savings & Loan, announced Wednesday that it has taken action in both state and federal court in Los Angeles to head off an unsolicited tender offer from Great Western Financial Corp.
A federal suit seeks an order enjoining the offer on the grounds that it “contains inadequate disclosures, untrue statements and omissions of material facts in violation of federal law,” according to a Citadel filing at the Securities and Exchange Commission.
“This doesn’t come as any surprise to us,” a spokesman for Great Western said. “We’ll fight this as hard as we can.”
Citadel also said it has sought an order in Los Angeles Superior Court to cancel a voluntary merger that the two financial institutions agreed to last May. Though Citadel insists that the agreement is dead, Great Western maintains that the accord is still valid.
Takeover Battle Likely
Citadel’s latest offensives represent a marked escalation of the feud that began last summer when the proposed merger broke down. A takeover battle now appears very likely between two of California’s most highly regarded savings and loan associations.
If Great Western’s tender offer eventually succeeds, it’s likely to create the largest savings and loan company in the nation, with assets well above $28 billion. The merger also would add 29 branch offices to the 230 that Great Western already has throughout the state.
Great Western is offering Citadel’s shareholders 1.2 shares of Great Western stock for each share of Citadel, a deal worth about $175 million based on Great Western’s closing price of $41.875 on Wednesday.
The fight has grown increasingly complicated in recent weeks as the two financial institutions have pleaded their cases in court and before regulatory agencies in Washington.
Though Citadel is clearly unhappy about the tender offer, its statement Wednesday cautioned Citadel shareholders against interpreting the court actions as a recommendation on the tender offer. The directors won’t decide what to recommend until Monday, the company said.
Citadel said a hearing has been scheduled for April 9 on its suit in federal court, at which time it will seek a preliminary injunction to enjoin Great Western’s offer. The tender offer is scheduled to expire April 25.
Citadel’s federal court suit shows that Glendale Federal Savings earlier this month was interested in bettering Great Western’s offer but decided against playing the role of “white knight” because it was afraid of getting sued by Great Western.
Citadel Chairman James Taylor said in a declaration that Ray Edwards, chairman of Glendale Federal Savings’ holding company, “later told me that Glendale Federal would be interested if ‘Great Western were to go away.’ ”
Sends Letter
Other companies that have expressed an interest in buying Citadel in the past year include Home Savings of America, California Federal Savings and Downey Savings, Citadel Chief Executive Gerald Barrone said in a separate declaration.
Barrone sent a letter to Fidelity Federal Savings employees last week suggesting that Great Western won’t be any more successful than corporate raider T. Boone Pickens Jr. was last year in trying to take over Unocal.
“Given the time and effort which Great Western has invested in this project so far, it has very little to lose in at least attempting the tender offer,” Barrone told the employees. “However, as others--such as Boone Pickens--have learned, not all tender offers are successful.”
One part of the original merger agreement that has proved particularly contentious was a stipulation giving Great Western the right, if the merger agreement fell through, to acquire $400 million in adjustable-rate mortgages at below-market rates from Fidelity Federal Savings.
Earlier this month, the Federal Home Loan Bank Board invalidated this option, saying that it was “an unsafe and unsound banking practice which would result in a substantial dissipation of the assets of Fidelity Federal.”
