Great Western Turns Down New $7-Billion Ahmanson Bid

Great Western Financial Corp. on Wednesday rejected a sweetened $7-billion bid from H.F. Ahmanson & Co., and reaffirmed its commitment to merge with Washington Mutual Inc.

The latest move in the takeover battle came a day before a deadline set by Ahmanson for its consent solicitation, which asks investors to support proposals that Great Western treat all bidders equally, negotiate with Ahmanson and set an annual meeting date.

But analysts expect the deadline to be pushed back, noting that most institutional investors, who hold more than 70% of outstanding Great Western shares, have not yet decided.

“Investors are having a hard time making up their minds, and that’s why it’s such a fierce struggle,” said Smith Barney analyst Thomas O’Donnell.

“Most of the institutional investors are waiting to see how the situation plays out before making their decision and are aware that there is a lot of time,” said one source close to the situation.

A source familiar with the situation said Friday was a “target” date and that it could be pushed back. Analysts said it could be weeks before the result of the consent solicitation is determined.

In rejecting Ahmanson’s bid, Great Western also said it continued to oppose the consent pledge and urged shareholders not to sign any consent card sent by Ahmanson and instead sign and return the consent revocation card.

“Today’s rejection was expected and a minor setback for Ahmanson. The consent is a much more important step, and if Ahmanson doesn’t prevail, they’re in trouble,” said Thomas Theurkauf, analyst with Keefe Bruyette Woods.

Great Western, which is based in Chatsworth, has repeatedly rejected Ahmanson’s advances in favor of Washington Mutual’s $6.6-billion offer.

A source close to Washington Mutual said a shareholder vote on its agreement with Great Western is likely to be scheduled in late May or early June.

Ahmanson said Great Western’s latest rejection was in disregard of shareholders’ interests.

“The Great Western board is obviously afraid of creating a level playing field to assure that the best interests of its stockholders are served,” said Ahmanson.

“For the board to reject the Ahmanson merger proposal without ever discussing it with us is inconsistent with maximizing stockholder value,” Ahmanson said.

Ahmanson said it will not be deterred by Great Western’s board and is not going away. It also urged shareholders to participate in the consent solicitation.

Ahmanson, the nation’s biggest savings and loan, originally had offered $6.1 billion for Great Western, but Washington Mutual made its higher bid March 6 and Great Western accepted. Ahmanson, based in Irwindale, later upped its offer, but Great Western continued to resist.

Great Western says it believes that a combination with Seattle-based Washington Mutual will provide its stockholders with a superior value opportunity.

It said Wednesday that it was working closely with Washington Mutual to move their merger forward.

With assets of $42.9 billion, Great Western is a diversified financial services company operating more than 1,150 mortgage lending, retail banking, and consumer finance offices nationwide.

Its principal subsidiary, Great Western Bank, is a mortgage-oriented consumer bank with branch networks in California and Florida.

Great Western’s stock lost 37.5 cents to $44 on the New York Stock Exchange, while Washington Mutual fell 69 cents to $50.50 on the Nasdaq market. Ahmanson added 12.5 cents to $38.875 on the NYSE.