Ahmanson Prepares for a Fight
A day after its surprise bid for rival Great Western Financial Corp., the parent of Home Savings of America prepared Tuesday for a possible takeover fight. But analysts said Wall Street’s favorable reaction to the proposed merger suggests Great Western’s days as an independent financial services company are numbered.
Great Western, which was caught off guard by H.F. Ahmanson & Co.’s bid late Monday, reacted cautiously, saying only that it would review the offer. Customers and employees of the two institutions seemed to take the news in stride.
But the move by Irwindale-based Ahmanson, the operator of the nation’s largest thrift, propelled Great Western’s stock up $10.625 to $44.875 on Tuesday. Ahmanson’s stock rose $4.375 to $44.875, both on the New York Stock Exchange.
The proposed deal is valued at about $6.5 billion, based on Tuesday’s closing price.
“It’s a pretty hard price to beat,” said Campbell Chaney, a banking analyst in Walnut Creek, Calif. “I think we’ll know in a short time if another suitor were to show.”
Either way, analysts suggested that somebody would snatch Great Western, which has long been rumored to be a takeover target. With assets of $43 billion, Great Western is the nation’s No. 3 thrift. It has 416 branches, including 296 in California.
“There may be a bidding war,” said Bert Ely, a financial services consultant in Alexandria, Va. The Home Savings offer “puts Great Western into play,” he said.
Girding for a possible fight, Ahmanson on Tuesday filed a lawsuit in Delaware Chancery Court aimed at blocking Great Western’s “poison pill”--certain defenses that companies use to thwart unwanted takeovers.
Charles R. Rinehart, Ahmanson’s chief executive, said Tuesday that he would prefer a negotiated agreement. But Rinehart said the company’s board has been seriously developing the merger plans for 3 1/2 months and that it is committed to seeing it through.
“We don’t know if there will be other entrants,” Rinehart said. But, citing operational synergies and the significant overlap of branches, he said, “At the end of the day, we think we’ll have the best fit.”
Under Ahmanson’s offer, Great Western shareholders would receive a tax-free exchange of 1.05 common shares of Ahmanson stock for each share of Great Western--or $47.12 a share based on Tuesday’s price. That’s a 38% premium over Friday’s closing price.
Rinehart said he first broached the idea of a merger to Great Western’s chief executive, John Maher, about 13 months ago. But Maher didn’t appear interested, Rinehart said. Monday night, Rinehart said he talked to Maher briefly three times over the phone and faxed a copy of the proposal to Maher’s home. In the last conversation, which Rinehart described as cordial, Maher told him that he would consider the proposal.
Rinehart said he viewed the offer as too attractive for Great Western shareholders to resist.
Great Western has reportedly hired Goldman, Sachs & Co. and Merrill Lynch & Co. to help it get a better price. Ahmanson has hired the team of advisors that Wells Fargo & Co. used in its battle to acquire First Interstate Bancorp: the law firm of Sullivan & Cromwell and investment bankers Credit Suisse First Boston and Montgomery Securities.
While analysts agreed that shareholders are likely to come out ahead, the likelihood of a merger raised uncertainties for employees at Chatsworth-based Great Western as well as consumers who seemed wary about yet another big merger in the state’s financial services industry.
“I’m afraid I’m going to lose my job,” said Linda Wimsatt, an employee at the Great Western Bank branch in Fountain Valley. Wimsatt is an investment counselor who recently left Home Savings to take her current position at Great Western.
If the merger goes through, Ahmanson said, it expects to close 180 branches in California, most of them in the southern half of the state. A majority of those closed would be in areas where there are Home Savings and Great Western branches within a mile of each other. As a combined entity, Home Savings would then have a total of 432 California branches--136 more than it now has. Home Savings also would have another 190 branches, principally in Florida, where it would be the fifth-largest banking institution.
Rinehart said he had no estimate of how many jobs would be eliminated in the merger. But he suggested that the brunt of the cuts would be felt by Great Western workers, although he said Home Savings has just put a limit on its hiring to minimize possible job cuts.
Great Western has already slashed its payroll several times in the last few years as it has struggled to recover from Southern California’s real estate recession. The last time was three months ago, when the bank unveiled a round of cuts that would cost 800 people their jobs.
“Some people are walking around saying, ‘Oh my God, oh my God,’ but there is not point in that,” said Steve Buchanan, 36, a product administrator who was laid off by Great Western once, then hired back. “You can’t worry about it.”
In California, the combination would create the third-largest financial institution, with $93 billion in assets--after giants BankAmerica and Wells Fargo.
Rinehart said that because of the big overlap in branches, customers of the combined thrifts stood to benefit from the merger by having more access to branches, ATMs and other services. He said customers would also enjoy the strengths of each company--Great Western’s greater experience with checking accounts and Home Savings’ consumer lending, for example.
But some analysts said a Home Savings takeover of Great Western would bring much of the same inconvenience to customers that has resulted from other combinations.
“It means there will be fewer branches serving the same number of people, and that will translate to less convenience for consumers,” said Ed Carpenter, a banking consultant in Irvine. But the potential long-term benefit, he said, would be more products.
Some of Great Western’s customers were unconcerned. Many thought their service would be unaffected or improved.
“I don’t think it will affect my business because both [Home Savings and Great Western] are very customer-oriented institutions,” said Paul Hydrick of Huntington Beach, a Great Western customer since September. “I think they are more customer service-oriented than Bank of America or Wells Fargo, who have swallowed up all the banks around here.”
On the other hand, customer Debra Schnacker of Huntington Beach said she hopes a Home Savings acquisition would improve service.
“I don’t think it can get any worse,” said Schnacker, who has been a Great Western customer for eight years. Schnacker complained that the thrift holds deposited checks too long and of her wait in lines. At the time, she was in a line of 14 customers.
Mary Phillips, who was standing in front of Schnacker in line, echoed the complaint about long lines. “Many times I come here I just walk out because the lines are too long,” she said.
Phillips said she is much happier with Home Savings, where she also has an account. But Eve Simon of Fountain Valley said she would transfer her funds elsewhere if Home Savings bought Great Western.
“I left Home Savings in 1987 when they started changing all their policies,” Simon said. “Now I’m going to have to find something else,” she said.
Times staff writer Jill Leovy in the San Fernando Valley and correspondent Melinda Fulmer in Orange County contributed to this report.
The Whys and Wherefores
* The state’s remaining big thrifts are more vulnerable to takeover. D5
* Charles R. Rinehart rebuilt Home Savings with untraditional tools. D5
* The hostile route no longer carries the stigma it once did. D5
