Valley Federal S&L; Is Searching for a ‘White Knight’
Valley Federal Savings & Loan, facing a takeover threat from Citadel Holding, said Thursday that it is talking with other potential merger partners.
Citadel, the Glendale-based parent of Fidelity Federal Savings & Loan, has not yet made a formal offer to buy Valley Federal, the Van Nuys firm that is the biggest financial institution in the San Fernando Valley.
Citadel has obtained options and commitments to purchase 39% of Valley Federal’s shares and has said it wants to buy the remaining stock. Valley Federal has 5.8 million common shares outstanding.
Citadel Chairman James Taylor said only that despite Valley Federal’s talks with the other companies, he expects to meet officials of the S&L; next week to promote his proposal.
Valley Federal did not identify the companies with which it is talking about possible mergers, and David Fleming, the S&L;’s outside counsel, declined to elaborate except to say that they include other financial institutions. After the announcement, Valley Federal’s stock closed at $16 a share, up $1.375, in national over-the-counter trading. Citadel edged up 25 cents to $31 a share on the American Stock Exchange.
Should Citadel’s bid succeed, it would create the 14th-largest S&L; in California, with assets approaching $7 billion. Citadel currently has assets of $3.8 billion; Valley Federal’s total is $3.1 billion.
Meanwhile, Valley Federal also said its earlier plan to sell a minority stake in the S&L; to Fisher Bros., a New York real estate partnership, had fallen through. Valley Federal agreed in mid-August to sell 15% of its unissued common stock to Fisher for $15.2 million.
The agreement, which also permitted Fisher to eventually purchase up to 24.9% of the company, was widely seen as Valley Federal’s effort to stave off a hostile takeover by placing stock in friendly hands. But Valley Federal said Thursday that the agreement lapsed before Fisher could get approval from the Federal Home Loan Bank Board, which regulates S&Ls;, to buy the shares.
Fleming, when asked if Valley Federal would attempt a new deal with the group, said: “We don’t have any present plans to extend the agreement.”
Fisher officials declined to comment. However, Valley Federal said in late November that Fisher was reassessing its plans to buy the stock in light of Citadel’s bid.
Besides talking with other potential suitors, Valley Federal did not specify what alternatives to Citadel’s threat it is considering.
Among the other steps companies typically weigh when trying to foil an unwanted merger include adopting anti-takeover provisions in their corporate charters, buying back their stock or--as in the Fisher case--selling blocks of stock to friendly investors.
But Gerald Haims, an industry analyst with Seidler Amdec Securities, said that because Citadel already is poised to buy so much of Valley Federal’s stock, Valley Federal must act quickly, meaning that its “only viable option is if they can come in with somebody else as a ‘white knight,’ ” or friendly merger partner.
Valley Federal still has some breathing room, however. Fleming said Citadel cannot actually buy any Valley Federal stock until it gets approval from the FHLBB, and that the agency will not make a decision before Jan. 4, which is when the public comment period for Citadel’s application expires.
