In the times of King Arthur, damsels in distress could rely on knights in shining armor to come to their rescue. In these times, bankers--frightened of losing their jobs as interstate banking and deregulation encourage consolidation--turn for protection to men in suits who have plenty of money and share their point of view.
According to banking analysts, this is what occurred Friday when Donald C. Headlund, president of Valley Federal Savings & Loan, announced an agreement to sell 15% of its stock for $15.2 million to the Fisher Brothers of New York, an investment group.
The Fisher Brothers will also be able to name two members to Valley Fed's board of directors, and may later be permitted to buy up to 24.9% of Valley Fed's stock.
"It's designed to put the stock in friendly hands. Also, perhaps there's an under-the-table agreement that if the Fisher Brothers want to buy the whole thing, management gets to keep their jobs," said Jerome Baron, banking analyst with Prudential-Bache.
"What they're doing is trying to block other companies," said Gerald S. Haims, analyst with Seidler Amdec Securities.
Valley Federal, headquartered in Van Nuys, is the San Fernando Valley's biggest banking institution, with assets of $2.9 billion, and is a prime takeover candidate.
Before Friday's sale of new stock, four investment groups controlled nearly 40% of Valley Federal's stock, and some of them favor selling Valley Fed.
There are several reasons for a sale, investors said. Although Valley Fed has a strong presence in the fast-growing San Fernando and San Joaquin valleys, it could grow even faster by teaming up with a larger banking institution.
Valley Fed still needs to add more middle management talent to grow, analysts said, and it lacks the advantage bigger banking institutions have of obtaining lower cost funds from overseas or more effectively packaging mortgage securities for sale.
Although Valley Fed's performance has improved as interest rates have dropped--it swung from an $11.5-million loss in 1984 to a $17-million profit last year--its overall performance remains rather mediocre (see related story this page.)
By linking up with the Fisher Brothers, major real estate developers in New York, Headlund appears to have put up a roadblock to any immediate sale.
Is that why Headlund, who has worked at Valley Fed since 1960, made the deal? "We think it will be beneficial for the company and its shareholders," he said.
Asked if a deal had been made to insure that his management team will stay on if the Fisher Brothers take control of Valley Fed, Headlund said, "You would have to draw your own conclusions on that."