Great Western to Buy Leucadia Unit : Represents 2nd Major Expansion Into Consumer Finance

The parent company of Great Western Savings & Loan has agreed to acquire the consumer finance operations of Leucadia National for an undisclosed amount, the two firms said Thursday.

The move represents a second major expansion into consumer finance for Great Western Financial, a Beverly Hills holding company that is striving to become a broad-based, nationwide financial services company. Great Western Savings is the nation’s third-largest savings and loan.

“It’s probably a good deal for Great Western,” said Thomas J. Flynn, financial analyst for Morgan Stanley & Co. in New York. “The consumer operations of Leucadia have a good reputation.”

The sale is also expected to give Leucadia, a diversified financial services company based in New York, more money to finance the takeover activities for which it is best known. In recent years, Leucadia has tried but failed to take over several firms, including Avco and National Intergroup.

Although the sale price was not disclosed, Leucadia said it expects to reap a pretax gain of about $80 million. Leucadia earned $22.2 million last year, 44% of which came from consumer finance, according to a report from Standard & Poor’s.

Great Western Chairman James Montgomery put the sale price at “considerably less than $100 million” but added: “I can’t be any more specific than that.”

Hope to Close Sale Soon

A spokesman for Great Western said the companies hope to close the sale within “a matter of weeks.” Should a final agreement be reached, it would create one of the largest companies of its kind in the country, Montgomery said in a phone interview.

“This will be close to a $1-billion consumer finance company,” he said. “There aren’t too many of those around.”

Great Western’s initial plunge into consumer finance came in 1983, when it acquired Aristar for $165 million. Aristar, which is also an insurance company, has 275 consumer finance offices in 21 states. Its customers have outstanding loan balances--known as net receivables in consumer finance argot--of $681 million.

Leucadia’s consumer finance operation has 177 offices in 11 Southeastern states, including nine where Aristar already has offices. It has net receivables of more than $246 million.

Leucadia spokesman Stephen Jacobs confirmed that Leucadia may use the proceeds of the sale to finance acquisitions.

“What we do with the money, we haven’t any (specific) plans,” Jacobs said. “I would think the process (of looking for new acquisitions) will continue.”

Earlier this year, Leucadia agreed to acquire GATX, an aircraft and rail-car leasing company, for $545 million, but the deal fell through in May before a definitive agreement could be reached.