First Interstate Meets; B of A Shields Officers
First Interstate Bancorp’s board of directors meets today to consider its next move in its bid to acquire San Francisco-based BankAmerica only days after BankAmerica disclosed details of a rich “golden parachute” plan for its key senior managers.
The plan, which would give BankAmerica’s top officers fat settlements if they lose their jobs after a takeover, was disclosed in a filing with the Securities and Exchange Commission that also included additional details of severance packages the company granted its former top officers.
In addition to huge cash awards, former president Samuel H. Armacost and former chairman Leland S. Prussia will get to keep bank-paid club memberships and security alarm systems at their homes.
First Interstate’s board meets amid indications that several of its outside directors are reluctant to launch a hostile tender offer for BankAmerica, which earlier this month asked First Interstate to withdraw its “friendly” $3.4-billion offer to acquire the company.
Restructuring Announced
The board’s deliberations will likely be complicated by BankAmerica’s announcement Friday of a restructuring program aimed at hastening BankAmerica’s return to profitability and boosting the price of its stock.
BankAmerica is the ailing parent of Bank of America and Seafirst Bank, the largest banks in California and Washington state, respectively. First Interstate owns a network of banks throughout the West.
First Interstate has offered to buy BankAmerica for a package of securities that First Interstate values at $22 per BankAmerica share. BankAmerica contends that its own restructuring program will boost its book value--or assets minus liabilities--to $24 a share.
Other options open to First Interstate include withdrawing the offer, perhaps temporarily, or launching a proxy fight designed to elect pro-merger directors to BankAmerica’s board.
BankAmerica’s shareholders are thought to be restive after about $1 billion in losses over the past 18 months and the elimination earlier this year of the company’s common stock dividend.
BankAmerica executives apparently are restive, too. The golden parachute plan for executives was enacted by BankAmerica’s board of directors in August “to minimize the distraction to existing senior managers occasioned by threats of abrupt changes in the control” of the company, according documents filed with the SEC. In essence, the plan provides key officers with three years of pay and other benefits if they’re fired after a change of control or leave for other “good reasons.”
SEC Filing
The SEC filing also disclosed that BankAmerica paid heavily to lure newly named vice chairman and chief financial officer Frank N. Newman from Wells Fargo & Co. Newman will be paid at least $675,000 in 1987, including $400,000 in cash bonuses.
Armacost’s severance package provides cash payments at the rate of $575,000 per year through June 30, 1988; he’ll also be entitled to a monthly pension of nearly $11,000 when he turns 55 in 1994.
Prussia will get paid $420,000 a year through October 31, 1988. His pension arrangements weren’t disclosed. The payments to both men may be reduced if they obtain full-time jobs elsewhere. Both men are also entitled to BankAmerica stock worth hundreds of thousands of dollars.
Besides security services and club memberships, both men are entitled to such perks as bank-paid physical examinations, health-care plans, office space, secretarial assistance and services in helping them find another job.
Many BankAmerica employees have expressed shock and outrage at the generosity of the severance packages, which come at a time that the bank is losing hundreds of millions of dollars and has enacted a strict austerity program that calls for laying off thousands of workers.
