B of A Pressing Sale of Overseas Assets : Sale of Schwab Brokerage Unit Considered; Founder Plans Offer
BankAmerica is quickening the pace of its asset sales, actively seeking buyers for as much as $6 billion in overseas assets, including subsidiary banks in Italy, West Germany and Spain and Bank of America branches around the world.
In addition, the company said Thursday that it would consider selling its Charles Schwab & Co. discount brokerage firm, which it acquired in 1983. Schwab, who still runs the company as a BankAmerica subsidiary, said in a statement that he is preparing a plan to buy back his firm from BankAmerica for about $250 million.
“I’m ready to go. I want my company back,” Schwab said through a spokesman.
BankAmerica sources said the sales could bring net gains of about $750 million, strengthening the bank’s capital position and helping it fend off an unwelcome takeover bid from Los Angeles’ First Interstate Bancorp. A senior BankAmerica source said, however, that the company may still need to go to outside investors for an additional capital infusion in its struggle to remain independent.
Aside from the foreign units, the asset spinoff program is said to involve the sale and leaseback of valuable Bank of America branch locations in California and the sale of hundreds of millions of dollars in credit card, auto and commercial loans.
May Reduce Assets by 20%
In all, the nation’s second-largest banking firm expects to reduce its overall size by as much as 20%, shrinking from its current $113 billion in assets to as little as $90 billion by the end of next year.
BankAmerica is trying to speed the sale of many of the assets and units that First Interstate would divest to help pay for its $3.4-billion acquisition of BankAmerica. Sources said BankAmerica executives told the company’s board of directors that BankAmerica itself should profit from the sale of the firm’s assets, not First Interstate.
That was one of the chief considerations in the board’s decision on Monday to ask First Interstate to withdraw its takeover bid, sources said. The company said it needed time to study its prospects and devise a recovery plan.
BankAmerica board member Richard P. Cooley, chairman of BankAmerica’s Seafirst unit in Washington state, said this week that no decision on a merger with First Interstate or major restructuring is likely before the end of the year.
Meanwhile, Schwab said Thursday that he and his management team and as many as 10 unnamed outside investors will raise the funds for the Charles Schwab & Co. buyout bid, which will be submitted to BankAmerica within the next few weeks.
BankAmerica said Thursday in a statement that it would consider selling the Schwab firm “assuming a suitable purchaser (were) ready to recognize the full value of the company.”
BankAmerica’s willingness to sell the profitable and well-run company is expected to inspire competing bids. New York’s Citicorp and Los Angeles’ Security Pacific, among others, are rumored to be interested in acquiring the retail brokerage house, but neither bank would comment.
Schwab is strongly opposed to the acquisition of his company by another bank because association with a federally regulated bank severely limits an investment firm’s powers, he said. As a bank subsidiary, the company cannot offer its own mutual funds, underwrite corporate debt and equity or provide other services that a free-standing securities firm legally can offer.
Charles Schwab & Co. was acquired by BankAmerica for stock worth about $55 million, making Schwab a multimillionaire and giving him a seat on the BankAmerica board of directors.
But relations soon soured between the bureaucratic banking giant and the entrepreneurial Schwab firm. Schwab’s profits grew rapidly, reaching $11.4 million last year (they are expected to exceed $25 million this year), while BankAmerica was descending into a swamp of bad loans and massive losses. BankAmerica lost $337 million in 1985 and has reported losses of $600 million so far this year.
Schwab quit the BankAmerica board in August because of personality and policy conflicts with BankAmerica President Samuel H. Armacost and other bank managers and directors.
Armacost was asked to resign last month and was replaced by former BankAmerica Chief Executive A. W. Clausen.
Separately, BankAmerica said Armacost has been granted 128,100 shares of BankAmerica common stock as part of a management bonus plan and a separate plan to discourage him from competing with his former employer or from raiding its executive ranks. Those shares today are worth nearly $2 million. The stock is in addition to a severance package of cash and an annuity worth $1.7 million.
