Cuts Expected if Ahmanson Acquires Coast
H.F. Ahmanson & Co.’s plan to buy Coast Savings Financial Inc. for about $900 million could result in the closure of about 50 branches statewide and mean hundreds of layoffs, industry analysts predicted Monday.
The combination of Ahmanson, the Irwindale parent of Home Savings of America, and Los Angeles-based Coast, the parent of Coast Federal Bank, was hailed on Wall Street on Monday, buoying stock prices at both companies. The acquisition, still subject to regulatory approval, would create California’s third-largest financial institution, with $39.2 billion in deposits in California, Texas and Florida; $56.6 billion in assets; and 460 branches.
“It’s a tremendous deal for Ahmanson,” said Thomas O’Donnell, an analyst with Smith Barney Inc. in New York. “This will be a glitch-free acquisition.”
New details emerged Monday:
* Branch closings are expected to be high, because about 50 Coast branches--more than half of the 90-branch network in California--are within a mile of Home Savings’ branches, analysts said. Any Coast branch that is closed would be converted into a Home Savings branch.
* Ahmanson officials said layoffs among Coast’s 1,500 employees and Ahmanson’s 9,300 workers would be “minimal” because the thrift now has 500 openings. But industry analysts pegged the number of layoffs at 600 to 700 workers, because of branch and administrative duplications.
* In New York Stock Exchange trading, Coast Savings’ stock jumped $4.52 a share, about 8%, to close at $58.52. Ahmanson’s stock increased $1.50 a share to close at $58.63, also on the NYSE.
“This acquisition significantly enhances our presence in California,” said Charles R. Rinehart, chairman and chief executive of Ahmanson. “We’re trying to give consumers and small businesses a very attractive alternative with our more personalized service.”
The deal comes after Ahmanson’s failed hostile bid to acquire Great Western Financial Corp. of Chatsworth. Great Western was later bought by Washington Mutual of Seattle.
The friendly acquisition is considered a move to stave off a takeover of Ahmanson by a larger financial institution. Although it makes Ahmanson a stronger and more viable independent financial institution, analysts said it could also make the nation’s second-largest thrift even more attractive to a buyer.
Ahmanson’s best defense against being acquired is a high stock price, analysts said. And so far, most analysts said Monday that Ahmanson is doing all the right things.
“Ahmanson is acting more and more like a consumer bank, benefiting from the comeback of the California economy and looking for smart acquisitions like Coast,” said O’Donnell. “This really does the trick.”
The nation’s thrifts, traditionally focused on home loans, are aggressively becoming more bank-like and attempting to be full-service financial supermarkets offering everything from checking accounts to small-business loans.
While Rinehart said the combined entity would boost its small-business loans in California dramatically in the next 12 months, as of June less than 1% of Home Savings’ entire loan portfolio was to small businesses. Coast’s non-mortgage loans, which include consumer and small-business loans, were even less than 1%.
“They would like to beef up their small-business loans,” said Ed Carpenter, a bank consultant in Irvine. “And they certainly have the room to do so.”
The $900-million purchase price is a complex combination of stock and tradable certificates, representing a right to receive proceeds from any recoveries made in a suit against the government. Last year, the Supreme Court ruled that thrifts may sue the government for breach of contract as a result of Congress forcing thrifts to change a type of accounting method.
“I’m confident they will have a large cash award; it’s just the amount that’s up for grabs right now,” said Thomas Theurkauf, an analyst with Keefe, Bruyette & Woods Inc. in New York.
The acquisition of Coast is just one of many in the rapidly consolidating California thrift industry. About 60 thrifts are left in California, down from more than 200 in the mid-1980s.
Analysts expect that number to drop even further, to about 30 thrifts by this time next year.
“Ahmanson is going to still be looking aggressively for acquisitions,” said Barry Rubens, president of California Research Corp., a savings and loan and bank consulting firm in Santa Monica. “There could be several more here. It will enable Ahmanson to be more of a competitor.”
