Great Western Turns Down Ahmanson’s Sweetened Bid
Great Western Financial Corp. on Wednesday continued to frustrate its hostile suitor, H.F. Ahmanson & Co., rebuffing Ahmanson’s sweetened merger proposal and refusing to meet to discuss a possible merger.
The rejection was expected but nonetheless prompted a fiery response from Ahmanson, which accused Great Western’s board of violating its fiduciary duty to shareholders.
“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, the parent of Home Savings of America.
Ian Campbell, a Great Western spokesman, called that statement “ludicrous and ridiculous.” He reiterated that Chatsworth-based Great Western remained strongly committed to a friendly merger with Washington Mutual Inc. of Seattle.
Great Western and Washington Mutual announced a merger agreement March 6, after Ahmanson made an unsolicited proposal for the thrift Feb. 17. Ahmanson raised its offer early last week, but investors have reacted coolly to the revised bid.
Ahmanson, based in Irwindale, is the nation’s largest thrift, with $50 billion in assets. It is closely followed by Washington Mutual and Great Western.
On the morning Ahmanson made its revised offer, the proposal was worth about $3 more per share than Washington Mutual’s proposal, but that gap has since narrowed.
Ahmanson’s stock edged up 12.5 cents Wednesday to close at $38.875, while Washington Mutual dropped 68.75 cents to $50.50. Still, based on those prices, Ahmanson’s offer was valued at $6.64 billion, or $46.65 a share, compared with Washington Mutual’s $6.47 billion, or $45.45 a share. Great Western’s shares, meanwhile, dropped 37.5 cents to $44.
Ahmanson is currently soliciting Great Western shareholders in an attempt to pressure Great Western’s board to meet with Ahmanson. But Great Western is trying to block that consent solicitation effort as well.
Ahmanson’s inability to make headway with investors and Great Western’s board has frustrated Ahmanson executives, and that was apparent in Ahmanson’s lengthy and most unusual letter to Great Western’s 11 board members earlier this week.
In a 12-page letter, Ahmanson Chief Executive Charles Rinehart challenged Great Western to allow an independent investment banker to decide which of the two offers are stronger.
Under Rinehart’s proposal, Ahmanson and Great Western would jointly select and pay for an investment banker unrelated to the three companies. If that banker concluded that Washington Mutual’s offer was superior, Rinehart said, Ahmanson would withdraw its offer. But if the banker viewed Ahmanson’s offer as stronger, Great Western would break up with Washington Mutual and join with Ahmanson.
In the letter, which was made public Wednesday by Ahmanson, Rinehart also laid out in detail why he believes Great Western should merge with Ahmanson. By combining with Ahmanson, he argued, Great Western shareholders stood to benefit from a higher current offer and had better long-term prospects. Moreover, Rinehart said, Ahmanson would expect to keep senior Great Western executives, whereas, according to Rinehart, Washington Mutual has made no such commitments to Great Western executives.
Campbell, Great Western’s spokesman, declined to go over Rinehart’s letter point by point. But he said Great Western’s board had carefully considered Ahmanson’s revised offer as well as Rinehart’s letter during a six-hour review Tuesday. He said the board had compelling reasons to stick with Washington Mutual, because it viewed Washington Mutual as a superior company that would fit much better with Great Western and provide greater long-term value to shareholders.
As for Rinehart’s proposal for an independent banker, Campbell said, “It is highly peculiar and is asking our board of directors to abandon its fiduciary duties and turn it over to a third party.” Great Western is using as its investment bankers Goldman Sachs and Merrill Lynch. Ahmanson’s team is made up of Montgomery Securities and Credit Suisse First Boston Corp.
Madeleine Kleiner, Ahmanson’s executive vice president and general counsel, said in an interview Wednesday that it was not unusual to employ an independent banker as an advisor.
“We are that confident that we are willing to say, ‘Let an independent banker look at this,’ ” she said. “We’re concerned they’re not getting good advice.”
