Mixed Reviews Greet Aborted B of A Takeover : Shareholders Jeer, Civic Leaders Cheer, Employees Breathe Big Sigh of Relief
BankAmerica shareholders jeered, San Francisco civic leaders cheered and employees of both companies breathed a collective sigh of relief Tuesday on word that First Interstate Bancorp had dropped its $3.25-billion bid for BankAmerica.
The value of BankAmerica’s common stock dropped 7.2% as the issue closed at $12.875, off $1, on volume of 2.1 million shares. The plunge cost BankAmerica’s shareholders a total of $155 million.
First Interstate common gained $1 Tuesday to finish at $57 on volume of 206,000 shares.
BankAmerica’s institutional shareholders, who by and large had embraced First Interstate’s $21-a-share offer, vehemently denounced BankAmerica’s management and directors for spurning the bid.
“They shirked their fiduciary duty by failing to present the offer to shareholders,” Frank W. Terrizzi, president of Cincinnati-based Renaissance Investment Management, charged. “It’s distressing, frustrating and bothersome, and it borders on the unethical,” he added.
Terrizzi’s clients, who hold about 1 million shares of BankAmerica common, lost $1 million on their B of A holdings Tuesday. “Twenty-one dollars beats $12. It’s a big difference.”
‘Not Really Happy’
“I’m not real happy that FIB backed off,” added James Shelton, an analyst with the Teachers Retirement System of Texas, another large holder of BankAmerica stock.
“At the same time,” Shelton continued, “we got the attention of BankAmerica’s board and got them to do things they should have done a year and a half or two years ago.”
Such favorable changes, in his view, included the replacement last October of Samuel H. Armacost as head of the company by A. W. Clausen and the aggressive asset-trimming and cost-cutting moves that followed.
But those moves have not satisfied Haverford, Pa., attorney Richard D. Greenfield, who has class-action lawsuits on behalf of BankAmerica’s shareholders pending in both Delaware and California. “The shareholders were deprived of a good deal,” Greenfield contended in an interview Tuesday.
The Delaware lawsuit, which alleged that BankAmerica’s board was not negotiating in good faith with First Interstate, “will probably be amended to reflect actual damages to BankAmerica’s shareholders,” Greenfield added.
BankAmerica spokesmen refused to specifically address the charges Tuesday. “We’re sticking with Monday’s statement,” a spokesman said. That statement, attributed to Clausen, asserted that First Interstate’s withdrawal “is definitely in the interest of BankAmerica and all its shareholders.”
BankAmerica officials had questioned the value of the package of securities that First Interstate was offering, claiming it was worth perhaps $18 a share. However, many analysts pegged it at $20 to $21 a share.
Lawrence Cohn, an analyst with the Merrill Lynch investment firm in New York, said it might take three to five years for BankAmerica stock to rise to that level. Still, he said, he doubts that shareholder suits would succeed.
“The courts haven’t been particularly willing to second-guess directors, especially when a board of directors gives the appearance of having taken shareholders’ interests into consideration,” he said.
Whatever the effect on shareholders, the end of the takeover drama was good news to many employees of both companies. “All such transactions create anxiety and uncertainty, particularly among headquarters staffers,” noted Paul Minch, a senior vice president and head of public relations at First Interstate.
Quoting First Interstate Chairman Joseph J. Pinola, he noted that the combined company “wouldn’t need two heads of public relations or two chief financial officers.”
Branch employees of both banks were also afraid that their offices would be closed or sold as Bank of America and First Interstate consolidated their California operations.
Morale at BankAmerica, temporarily boosted as staffers joined in the fight against the threatened takeover, remains shaky, several sources in the bank said. “A lot of good people have their resumes out,” one middle manager said.
Clausen has vowed to slice at least 4,000 people from BankAmerica’s payroll this year, exclusive of those who leave as a result of asset sales. Analysts said Tuesday that the bank’s shrinkage will lead to further reductions in overhead next year.
That should keep BankAmerica safe from takeover, although Pinola vowed Monday to “monitor” the company’s performance.
“Unless there is another big negative surprise or some other dramatic development that necessitates a rescue, I don’t see this deal being revived,” said Stephen Berman, an analyst with Nomura Securities International in New York.
That is just fine with San Francisco civic leaders. “I am very pleased and heartened,” said Mayor Dianne Feinstein, during whose reign the city has lost more than half a dozen major corporate headquarters.
Under Pinola’s proposal, the combined holding company would have been based in Los Angeles but its Bank of America unit would have stayed in San Francisco.
