Bass Group Negotiating to Buy American Savings
The billionaire Bass family of Texas has offered to pay $500 million to acquire ailing American Savings & Loan, industry sources said Thursday.
As a tentative deal is now structured, sources said, the Robert M. Bass Group of Ft. Worth would buy American Savings’ deposits and healthy assets, while the Stockton-based company’s large amount of non-performing loans would be assumed by the Federal Savings & Loan Insurance Corp.
Whether the deal eventually goes through hinges on how much it will cost FSLIC, the arm of the Federal Home Loan Bank Board that protects depositors’ savings and foots the cost when an S&L; fails. At this point, it’s believed that the sale may ultimately cost the regulatory agency between $2 billion and $4 billion.
Officials at Robert M. Bass Group would not comment on their offer. Neither would executives of American Savings, which is the nation’s second-largest thrift and the operating subsidiary of Irvine-based Financial Corp. of America.
Regulators at the Federal Home Loan Bank Board confirmed only that they have entered into exclusive negotiations to sell American Savings to the Bass Group. The negotiating period will last 75 days.
To give the Basses an exclusive chance to put together a deal, regulators again broke off talks with Ford Motor, which owns First Nationwide Bank in San Francisco.
Ford has been an on-and-off suitor of American Savings for nearly a year.
Officials at Ford Motor couldn’t be reached. But one source close to the auto maker said the firm was “disappointed” with the regulatory action. “I don’t think they believe that the bank board has all the correct numbers,” he said.
A First Nationwide spokesman added: “Obviously, we’re disappointed, but we going to continue to seek other opportunities.”
Ford came close to buying American Savings, bad loans and all, for $1 billion several months ago, but the deal ultimately broke down over what government guarantees would be provided to protect the auto maker against future losses.
The news about the Bass Group comes at a time when industry pressure is building on FHLBB Chairman M. Danny Wall to resolve the problems of American Savings that have cast such a pall of uncertainty over the entire savings and loan industry.
American Savings has been in serious financial trouble for nearly four years and now has a negative net worth of $106 million.
“(Wall) needs a major accomplishment,” said the head of one large California financial institution. “He is starting to lose credibility fast.”
For their $500-million capital investment, the Bass Group would get American Savings’ 185 branches in California, its $16 billion in deposits and its portfolio of loans that are paying off. FSLIC would take control of American’s non-earning assets, which includes several billion dollars worth of soured real estate loans and foreclosed properties.
“The Basses are looking for good deals,” one savings and loan chief executive commented. “That’s the way they make money. They have deep pockets. If they can get the ‘clean’ assets out, that’s a helluva deal.”
Some industry experts believe that the toughest task facing FSLIC, which already has more liabilities than assets, is how to minimize its immediate accounting losses when a sale becomes final. Sources say any number of sticky legal and accounting issues could scuttle a deal, which must be reviewed and approved by the Internal Revenue Service and General Accounting Office.
The negotiating agreement with Bass Group follows several weeks of talks, which had remained a secret until last weekend when the Bass interest was disclosed in news reports. Bass Group is handling its negotiations through its sizable staff of mergers-and-acquisition experts, including real estate attorney Bernard Carl, a former employee of Salomon Bros.
Secretive Family
Though Robert Bass would not comment Thursday, it’s known that he’s very interested in the business prospects of a financial company in California--a state he likes because it is a gateway to the Pacific Basin and because regulators grant broader investment powers to savings and loans.
Robert Bass is part of a powerful, secretive family that includes three other brothers--Sid, Edward and Lee. The value of the Bass empire has been estimated at a minimum of $4 billion, and it is believed that the American Savings deal would have the family’s financial backing.
Robert Bass had been in the shadow of older brother Sid until he broke away and formed his own firm. The Robert M. Bass Group has invested in a variety of companies in recent months, ranging from retailing to television.
Fiercely private, the family has a policy of not speaking to the press about its business activities. Sid Bass, once pressed for a statement on one of his investments, told a reporter: “I have no comment. And further more, I have no comment on my no comment.”
Indeed, how the Basses withstand the publicity on this deal may affect whether the sale closes. Some believe that the family will pick up its chips if the limelight gets too intense.
“If they come under too close a scrutiny, they will simply disappear,” one industry source said. “There are other deals for them. The bank board is worried about that. . . . These people are not hungry. They’re interested but not desperate.”
Indeed, some say it’s far too early to count out Ford Motor. “It’s not over till the fat lady sings,” said one source close to the company.
