Great Western Plan on Severance Aims to Deter Ahmanson

Great Western Financial, adding more hurdles to H.F. Ahmanson’s hostile takeover bid, on Tuesday postponed its annual meeting indefinitely and adopted a hefty severance package for employees in the event of a takeover.

The annual meeting had been scheduled for April 22, at which time Ahmanson had planned to nominate three directors to push its unsolicited merger proposal. But in delaying the meeting, Great Western’s chief executive John Maher said, “We don’t want our shareholders put in a position of having to make important decisions without the benefit of all the information they need.”

Maher added that Great Western was still reviewing Ahmanson’s surprise proposal made Feb. 17, but analysts said it was clear the nation’s No. 3 thrift wanted plenty of time to study merger possibilities with others as well, including Seattle-based Washington Mutual or Norwest Corp. of Minneapolis.

Ahmanson, parent of the country’s largest thrift--Home Savings of America--immediately attacked Great Western’s latest actions, calling them “self-serving tactics destructive to shareholder value and to the best interests of Great Western employees.”

Ahmanson reiterated its commitment to completing its stock exchange merger, valued at $6.07 billion at Tuesday’s closing stock prices.

Although the new severance plan did not include sweetened pay packages for top management, under existing provisions, top executives would receive sizable compensation if Great Western were sold. James F. Montgomery, Great Western’s chairman, stands to reap about $23 million from his stock options, and Maher would get almost $14 million.

Irwindale-based Ahmanson can take legal action over Great Western’s postponement of the annual meeting, although not right away. Under the laws of Delaware, where Chatsworth-based Great Western is incorporated, a shareholder can ask a judge to require a meeting after 13 months from the last annual meeting. Last year’s meeting was held April 23.

Great Western’s severance package, meanwhile, could make a deal more expensive for Ahmanson, given Ahmanson’s plans to close 180 branches after a merger. But the package is likely to be much less of a deterrent to potential rival bidders, likely to be from out of state, because they probably would not shutter as many branches.

Great Western’s severance package would provide a minimum of four months and up to 16 months’ pay for laid-off employees if Great Western loses control of the company. The plan would cover most of the company’s 12,000 employees.

Great Western said the plan was aimed at allaying employee fears in the aftermath of statements by Ahmanson Chief Executive Charles Rinehart that only Great Western workers would be hit with layoffs in a merger. The severance package is more generous than offered to recently laid-off Great Western employees, including several hundred who lost jobs in the last few months.

Joseph K. Morford III, a bank and thrift analyst for Alex. Brown & Sons in San Francisco, said the severance package accomplishes two things:. “On the surface, they’re certainly wanting to take care of their employees. At the same time, there may be some motivation to make the bid more costly or onerous for [Ahmanson].”

Morford, among some other analysts, wrote in investment reports this week that Washington Mutual and other top potential rival suitors were unlikely to outbid Ahmanson if a bidding war emerged because they could not realize as much cost savings.

Washington Mutual, which entered California recently with its acquisition of American Savings and its 150 branches, is known for its skill as an acquiror and its solid management. Analysts say Washington Mutual may be able to cut as much as 35% of Great Western’s expenses, but that would still fall short of the 45% savings that Ahmanson expects to achieve.

Other analysts, however, point out that Ahmanson’s relatively young management team doesn’t have the long performance record of those at either Washington Mutual or Norwest.