GlenFed Decides to Buy Guarantee Financial Corp.

GlenFed Inc., parent of Glendale Federal Savings & Loan, said Thursday that it will buy Guarantee Financial Corp. of California, creating a combined thrift system of 217 branches in California and Florida with assets of $21 billion.

Glendale Federal is the fifth-largest savings and loan in the country, a ranking that would not be affected by the merger, which is subject to approval by shareholders and federal regulators. Guarantee, based in Fresno, owns Guarantee Savings, a major San Joaquin Valley thrift.

The purchase is valued at some $205 million. Under the agreement, each of Guarantee’s 6.2 million shares will be exchanged for about one share of GlenFed stock. Each GlenFed share was valued Wednesday, when the deal was struck, at about $33. The two companies said in their announcement that Guarantee holders will receive at least 0.9677 shares, but not more than 1.1828 shares of GlenFed stock.

GlenFed stock, traded on the New York Stock Exchange, closed Thursday at $31.875, down 87.5 cents. Guarantee, traded over the counter, closed at $30.25, up $3.50.

The proposed merger is the latest in a wave of consolidations involving financial institutions in the huge California market. Earlier in the week, for example, Security Pacific said it would buy Rainier Bancorp. of Seattle in an exchange of stock valued at $1.15 billion.

“The acquisition of Guarantee will fulfill one of our key objectives, which is to expand our operations into the Central Valley of California,” said GlenFed Chairman Raymond D. Edwards. He said the merger would add 200,000 customers to the 1.25 million now served by GlenFed.

Glendale Federal, established in 1934, has 109 branches in California, mostly in Southern California and the Bay Area, and another 67 branches in Florida, concentrated near Fort Lauderdale, Miami and Tampa. In addition, it has 14 subsidiaries in 11 states whose activities include commercial lending, mortgage banking and insurance. Guarantee, founded in 1919, has been a rumored takeover target for months. It has 41 branches in the San Joaquin Valley. In addition, its GESCO subsidiary provides data processing services for about 35 thrift associations in five Western states, including the nation’s largest, American Savings & Loan, based in Stockton.

“This merger with GlenFed will further increase Guarantee’s ability to provide a wide range of financial services to our customers,” Guarantee Chairman Lewis S. Eaton said.

Guarantee’s customers will not have to adjust to a new name--at least for now. “At this point, we think they’ll probably keep the Guarantee name,” said Roger Rittner, a spokesman for Glendale Federal. “After a year or so, we may look at the situation again.”

Glendale Federal--whose commercials feature entertainer Dinah Shore promising customers, “When you say, ‘Jump!,’ we say, ‘How high?’ “--wasn’t interested only in the Central Valley location. Analysts said the thrift placed an extremely high value on the GESCO subsidiary.

“Glendale believes GESCO is worth $50 million, maybe as much as $70 million,” said Joseph Jolson, a savings and loan analyst for Montgomery Securities in San Francisco. “I don’t have that much background following these companies, but that seems like a high value to me.”

“It may seem a little bit high,” Gerry Haims, an analyst with Bateman Eichler, Hill Richards stockbrokers said of the overall transaction. “But my feeling is that if we look ahead to fiscal 1988 earnings, it (the merger) is going to have a strong positive effect.”

In January, Guarantee acknowledged that it had received several recent purchase overtures.

GUARANTEE FINANCIAL AT A GLANCE

Guarantee Financial Corp. of California, based in Fresno, is parent of Guarantee Savings. Subsidiaries include GESCO, which provides data processing to the thrift industry. Other activities include insurance and real estate. It was founded in 1919.

Year ended Dec. 31 1986 1985 1984 Earnings (millions) $8.1 $14.1 $3.9

Assets: $3 billion

Employees: 1,500

Shares outstanding: 6.2 million

12-month price range: $10.25-$30.25

Book value: $13.99

Thursday close: $30.25

GLENFED INC. AT A GLANCE

Glendale-based Glenfed Inc. is the holding company for Glendale Federal Savings & Loan, with 14 subsidiaries including commercial lending, mortgage banking, insurance, real estate investment and discount securities. It was established in 1934.

Year ended June 30 1986 1985 1984 Earnings (billions) $1.66 $1.39 $1.09

Assets: $18 billion

Employees: 5,500

Shares outstanding: 21.3 million

12-month price range: $19.625-$32.75

Book value: $38.19

Thursday close: $31.875