Ahmanson Seeks Support for Its GW Bid

With Washington Mutual Inc. holding the high ground in the battle for Great Western Financial Corp., rival H.F. Ahmanson & Co. on Friday tried to rally support for its hostile bid, scheduling what could be a crucial meeting with the New York financial community on Monday morning.

Also on Friday, a community-lending advocacy group said it has doubts about Washington Mutual’s commitment to underserved communities in Southern California based on the way the thrift has handled its American Savings Bank, the 158-branch Irvine-based thrift that Washington Mutual bought last year.

Ahmanson geared up its campaign to woo Wall Street investors to its side after being formally rebuffed on Thursday when Great Western announced a friendly merger agreement with Seattle-based Washington Mutual. That combination would create an $87-billion-asset institution, surpassing Ahmanson’s Home Savings of America to become the nation’s largest savings and loan.

Ahmanson’s stock gained ground on Friday, but its bid still trailed Washington Mutual’s by nearly a half-billion dollars.

Irwindale-based Ahmanson must top Washington Mutual’s bid convincingly in order to have a chance of success, industry analysts said Friday.

Ahmanson shares jumped $1.375 to $42.125 Friday, while Great Western rose 62.5 cents to $47.50, both on the New York Stock Exchange. Washington Mutual’s shares slipped 12.5 cents to $52.875 in Nasdaq trading.

At those prices, Ahmanson’s offer to exchange 1.05 of its shares for each Great Western share was worth $44.23 a share or $6.08 billion to Great Western shareholders. The Washington Mutual offer of 0.9 shares for each Great Western share was worth $47.59 a share, or $6.54 billion in total.

If the final bids are close, analysts said, Wall Street isn’t apt to give Ahmanson much benefit of the doubt for several reasons. First, investors tend to prefer friendly deals over hostile ones, reasoning that the integration goes more smoothly in a marriage than in a conquest. Second, Washington Mutual gets points for experience, having completed a number of large acquisitions in recent years, the biggest the $1.7-billion American Savings deal. Also, Washington Mutual has been more profitable and had better stock-market performance in recent years.

But money talks, and experts said Ahmanson is not out of the running if it can improve its bid.

One Wall Street arbitrager, who tries to profit by making huge short-term bets on takeover situations, said the bidding could go substantially higher, well over the $50-per-share level.

The other part of Ahmanson’s campaign will be to try to point out flaws in the rival proposal. Both sides have representatives on the road talking with the large shareholders whose approval will ultimately decide the deal.

Washington Mutual Chairman Kerry Killinger was in Boston, for example, meeting with mutual fund managers John Hancock Advisors Inc. A day earlier, Ahmanson Chief Financial Officer Kevin Twomey was in Boston meeting with Fidelity Investments, which has a 7.5% stake in Great Western.

Ahmanson Chairman Charles R. Rinehart will host Monday’s gathering of financial analysts at New York’s St. Regis Hotel. He is expected to challenge some of the projections that Washington Mutual made in its bid, including projected cost cuts of $340 million by 1999--a number that some analysts have characterized as highly aggressive.

Ahmanson partisans also have criticized as excessive the “breakup fee” of up to $195 million that Washington Mutual will receive if Great Western chooses another partner. Washington Mutual’s minority-lending programs also will come under scrutiny.

Robert Gnaizda, general counsel of the San Francisco-based Greenlining Institute, said Friday that when Washington Mutual bought American Savings, it forced out top executives, including American Savings President Robert T. Barnum, and began making key decisions from Seattle.

The Greenlining Institute is a nonprofit organization that negotiates with corporations for more lending and services for minority and low-income communities.

“There are always negative consequences to making decisions out of state on our unique communities,” Gnaizda said. Community groups such as the Greenlining Institute “can make changes [in corporate practices] if the CEO is in the community that the institution serves. Otherwise, it’s very hard to do.”

The Greenlining Institute is also worried that the huge cost savings--$400 million projected by Ahmanson and $340 million by Washington Mutual--would be achieved by closing branches in low-income communities, Gnaizda said.

“We’re not sure they can make the cost savings except at the expense of our communities,” Gnaizda said.

He said that Washington Mutual’s Killinger telephoned him Friday and agreed to meet with him next week.

All three institutions have outstanding ratings under the Community Reinvestment Act, the law designed to prevent banks and thrifts from denying credit in poor neighborhoods.

However, Gnaizda said, 58% of financial institutions with assets of $5 billion or more have outstanding ratings. “Outstanding doesn’t mean anything,” he said.

Mulligan reported from New York and Rivera Brooks from Los Angeles.