Clausen Says He ‘Remains to Be Convinced’ of Value of 1st Interstate Bid for B of A
A. W. Clausen, BankAmerica’s newly installed chairman and chief executive, said Wednesday that he “remains to be convinced” about the desirability of First Interstate Bancorp’s $2.8-billion merger offer.
In his first public comments since reassuming the reins of the loss-ridden banking giant, Clausen said at a press conference here that he is seeking further information on the proposed transaction. “When we have that in hand,” he said, the board of directors “will weigh the merits of the proposal as they apply to our shareholders.”
Analysts and BankAmerica insiders have predicted that First Interstate’s offer will be rejected as inadequate.
Seeks Details on Offer
A First Interstate official said Wednesday that BankAmerica’s investment bankers, Salomon Bros., had requested more details on the value of First Interstate’s offer and on the terms of a proposed new issue of First Interstate preferred shares. The official said First Interstate expects to finish providing the information within the next few days.
He also indicated that First Interstate had set no deadline for BankAmerica to act on the offer but that it expects prompt action from BankAmerica’s board.
Clausen was summoned back to lead BankAmerica last week after board members lost faith in Samuel H. Armacost’s ability to cope with the crisis of confidence surrounding BankAmerica, the parent of Bank of America. The bank has lost nearly $1 billion in the last year, suffered management turmoil and seen its stock price plummet.
“When you’re asked to step into a tough place, and your friends are doing the asking, you do it,” Clausen said.
Unmatched Earnings Growth
Clausen left BankAmerica in 1981--after compiling a record of unmatched earnings growth during the 1970s--to assume the presidency of the World Bank, an international agency that sponsors development programs in poor nations. He left the World Bank post July 1 with a record most observers describe as competent but not distinguished.
Clausen said he was first approached about returning to B of A on Oct. 6, following a board meeting at which directors had decided to replace Armacost. Former Transamerica Chairman John R. Beckett, chairman of the BankAmerica board’s executive committee and a longtime friend and supporter of Clausen, called him in Washington to ask if he’d be willing to take his old job back.
Denying reports that he had lobbied for the job or that he and Beckett had discussed it several months ago, Clausen said he hadn’t seen or talked to Beckett in 15 months. They last saw each other at the Bohemian Grove, an executive retreat on the banks of the Russian River in Northern California, he said.
“My initial reaction was one of complete surprise and even shock,” Clausen said. But he accepted almost immediately.
At the press conference, Clausen said his priorities will be to accelerate cost cutting begun belatedly by Armacost and to bring BankAmerica’s $4.4 billion in problem loans under control. The bank will continue the layoff program begun earlier this year; it calls for bank employment to be slashed by 5,000 this year and by several thousand more next year.
“Of course there will be changes,” he said. “That’s in the nature of this situation. But the changes are more likely to be in degree and in pace rather than in direction.”
Flanked by a grim-faced Thomas A. Cooper, who was elevated to president of BankAmerica last Sunday after seven months as president of Bank of America, Clausen said he would not “engage in critiques” of Armacost and former Chairman Leland S. Prussia. Still, he appeared to fault prior management for cutting costs too slowly and for failing to install effective mechanisms for monitoring the bank’s hemorrhaging loan portfolio.
“We’ve got to be aware earlier if we’re bleeding and that we are bleeding,” Clausen said. “We’ve got to know where to apply the Band-Aid. All of this will take time.”
The 63-year old banker refused to speculate how long he will stay on the job.
“I serve at the pleasure of the board of directors,” he said, implying that he might stay on beyond the bank’s customary retirement age of 65.
“I do not have a contract and would not take a contract if one were offered,” he said.
He also declined “to conduct a post-mortem” on his previous tenure. Clausen has been accused of emphasizing short-term results and under-investing in new technology during the 1970s and leaving the company in 1981 ill-prepared to meet the rigors of deregulation.
“If I’d have known that deregulation would have passed as quickly as it did, or that interest rates were going to soar,” he said, “of course I’d have done things differently.”
