Ahmanson Layoff Flap Is Still Raging
The head of H.F. Ahmanson, engaged in a takeover fight for Great Western Financial, failed Friday to quell the anger caused by his remarks that only Great Western employees would be laid off in a merger.
In a letter with conciliatory overtones, Charles Rinehart, chief executive of the nation’s largest thrift, told Great Western that merit would be the basis in selecting employees in a combined company.
But Great Western’s chief, John Maher, who had expressed “outrage” at Rinehart’s remarks, did not appear placated. A senior Great Western executive said Friday: “Frankly, we find the letter confusing. It seems as if they’re trying to speak out of both sides of their mouth.”
Analysts, who were also taken aback by Rinehart’s promise to his employees earlier this week, said the flap itself was unlikely to derail Ahmanson’s takeover effort but could make a merger and the transition afterward that much more difficult.
Meanwhile, Great Western took an expected step Friday to slow down Ahmanson’s surprise takeover bid, which was made late Monday. Under a change to Great Western bylaws, Ahmanson is now faced with a wait of up to 20 days before it can take its proposals directly to Great Western shareholders.
Great Western, the nation’s third-largest thrift, said it has not completed its review of Ahmanson’s proposal, but sources say Great Western is apparently exploring merger opportunities with other potentially friendly partners, including Seattle-based Washington Mutual.
Either way, analysts have said Great Western is very likely to be sold given investor reaction to Ahmanson’s proposal. Great Western stock has surged more than $12 a share since Tuesday; it rose Friday by 62.5 cents to close at $46.375. Ahmanson fell 87.5 cents to $41.125, making the value of its stock exchange offer for Great Western at a little over $6 billion. Both thrifts trade on the New York Stock Exchange.
Although Ahmanson’s merger proposal thus far has prompted little vocal opposition from consumer groups, the flap over employee layoffs has clearly caused headaches for Ahmanson’s management.
Tuesday morning, the day after Ahmanson made its surprise offer, Rinehart told his employees that “no current Ahmanson employee will cease to have a job with the company or have his or her grade or salary reduced as a result of the merger.”
Great Western and others viewed that statement as indicating that the full brunt of post-merger layoffs would be felt by Great Western.
In his letter Friday to John Maher, Great Western’s chief executive, Rinehart did not retreat from that commitment to his employees.
However, Rinehart offered a conciliatory message. “We respect and admire the many talented people at Great Western and have made it our highest objective to bring on board as many of their employees as possible.”
Rinehart also advised Great Western to immediately limit its hiring. That, along with attrition and opportunities created by an expanded merged company, may mitigate the need for any layoffs, Rinehart said in his letter.
Analysts generally viewed that as unlikely, noting that Ahmanson could not meet the expected cost savings without eliminating hundreds, if not thousands, of duplicate positions.
“You can’t say on the one hand that you’re going to have millions of savings through synergies and say on the other hand that you’ll do it through attrition,” said Lloyd Greif, an investment banker in Los Angeles.
Ahmanson’s merger plans call for closing 180 branches in California and consolidating headquarters and other dual operations. Ahmanson says a merger will save $400 million annually by the end of 1998.
Bert Ely, a thrift analyst in Alexandria, Va., said, “I don’t think it gets in the way of doing the deal.” But, he added, “it’s unfortunate and has created a lot of anguish. What it may do is make the meshing of the two organizations harder.”
