Citadel Rejects Offer of $65 a Share : Two Directors Refuse to Approve Deal From Secret Bidder

Citadel Holding announced Friday that it has rejected a cash offer of $65 a share for its common stock because two of its directors and major shareholders, Alfred Roven and James J. Cotter, refused to go along with the deal.

Citadel, parent company of Fidelity Federal Savings, declined to name the would-be acquirer, which Citadel Chief Executive Gerald Barrone called a “very closely held secret.” One Citadel source, however, said the buyer was from Australia.

Skepticism Among Investors

Citadel’s announcement was greeted with some skepticism on Wall Street by investors who wanted to know who would be willing to pay such a high price for Citadel’s stock. Citadel is in the midst of fighting a hostile takeover by Great Western Financial, another Southern California savings and loan company.

“All the analysts and arbs here are totally bewildered by this,” Great Western director Cliff Miller said in a phone interview from New York. (“Arbs” are those stock traders known as arbitrageurs who now own most of Citadel’s stock.)

“It all sounds so bizarre,” added Jonathan Gray, an analyst for Sanford C. Bernstein & Co. in New York. Citadel’s stock closed Friday at $52 a share, up 1.37 1/2.

A statement from Citadel indicated that Roven and Cotter, who control more than 18% of the stock between them, were not willing to commit themselves to sell at $65 a share. That price, which is about 27% higher than the Great Western offer, has a total value of about $225 million, based on nearly 3.5 million shares of Citadel common stock.

Citadel revealed the rejection to comply with shareholder disclosure laws, company sources said. But the tactic has sparked controversy because Roven felt disclosure was unnecessary, he said, because the offer was not a serious one. He blamed Citadel’s attorneys for letting the announcement go out.

The would-be buyers “never really proved they were financially capable” of coming up with the money, Roven said in a telephone interview. “They wanted an option (to buy) my stock, but they were not willing to pay for it.” Such an option would have committed the directors to selling at the agreed-to price.

Price May Be Steep

Though some Wall Street analysts may consider $65 a share steep, Roven certainly doesn’t, pointing to recent premium prices being paid for S&L; companies.

Earlier this week, Marine Midland agreed to pay $106 million for a savings and loan in suburban New York that has about $1 billion in assets. Citadel has more than $3 billion in assets and earned $26 million last year.

“I think ($65 a share is) the very low end of the spectrum of what is fair,” Roven said.