Making Change
Gerald J. Ford, the man who helped engineer the proposed CalFed/GlenFed merger and would run the combined thrift, is an unassuming and soft-spoken Texan who’s considered one of the craftiest deal makers in banking.
Ford has spent the last 22 years buying, fixing and then selling an array of U.S. banks and thrift institutions, and for the last decade has done so with his deep-pocketed partner, billionaire financier Ronald O. Perelman.
The two have reaped enormous profits from their deals--Ford himself has amassed a net worth exceeding $300 million--not only by invigorating their thrifts before selling them but also by adroitly exploiting the savings-and-loan crisis of the 1980s and U.S. tax laws that provided their thrifts with substantial benefits.
Now, they’re taking on their biggest merger yet. The pair own First Nationwide Holdings Inc., the San Francisco-based parent of California Federal Bank, which Thursday announced plans to merge with Golden State Bancorp Inc., the owner of Glendale Federal Bank.
It would create the nation’s third-largest savings-and-loan association, with $51 billion in assets. Ford would be its chairman and chief executive; he currently holds those posts at CalFed.
But Ford, 53 and single--and unrelated to the ex-President--bristles at the suggestion that he and Perelman are simply using the GlenFed deal to fatten up First Nationwide for its eventual sale. Ford often has had to fend off comments that he’s mainly a deal maker, not a bank manager.
“We’ve had the opportunity to sell what we have in California and have passed,” he said in a telephone interview Thursday. “We’re continuing to make a substantial investment in this company.”
To be sure, Ford didn’t rule out an eventual sale of First Nationwide, which they bought in 1994. And it’s a sale that would enable Ford and Perelman to cash out on their personal investment in First Nationwide, estimated to be roughly $230 million.
(After the GlenFed deal closes, Ford said he would own 11% to 13% of First Nationwide, Perelman 31% to 33%, and Golden State’s holders would own the rest.)
But some analysts said Ford isn’t given the credit due him for enhancing his banks and S&Ls; before he sells them. Otherwise, they said, Ford wouldn’t make a profit on the resales.
“Ford’s in the business of buying, rebuilding and selling thrifts and banks. And it’s that middle ingredient [rebuilding] that gets you from A to C,” said Bruce Harting, an analyst at the investment firm Lehman Bros.
Ford has noted that he and Perelman also took a big risk with First Nationwide, purchasing the thrift at a time when California’s economy in general--and its S&Ls; in particular--were still struggling to break free of their severe recession of the early 1990s.
At the newly merged CalFed/GlenFed (which would take the CalFed name), Ford said he’ll strive to keep bad loans to a minimum, offer more financial services while keeping a lid on costs, “and try to offer a product and service that people want. It’s not a matter of our having more vision or intellect or that we’re going to outsmart anyone.”
His plan also calls for closing roughly 60 overlapping branches and some layoffs.
“You can count on Jerry Ford to squeeze out whatever costs there are to make this a very efficient operation,” said Charlotte Chamberlain, a thrift analyst at the investment firm Jefferies & Co. in Los Angeles.
Indeed, Ford and Perelman get rave reviews for turning around First Nationwide, which they bought with mostly borrowed cash when the company was an ailing unit of Ford Motor Co.
Using a combination of cost-cutting, asset sales and acquisitions--they bought CalFed a year ago--they’ve turned First Nationwide into a successful thrift focused on California.
Their First Nationwide investment also was built in good part on expectations of California’s economic rebound. And buying GlenFed now further reflects Ford’s knack for acquiring properties at opportune times.
That’s because GlenFed has been successfully waging a legal battle against the U.S. government over a disputed takeover accounting practice known as regulatory goodwill, a case that could bring the thrift up to $2 billion in damages. CalFed has a similar case pending.
And Ford and Perelman first hooked up in 1988 to create First Gibraltar Bank in Texas, which they assembled from five failed S&Ls; that federal regulators were anxious to unload. That enabled the pair to buy the thrifts while also getting federal protection from losses on the S&L;’s soured loans.
Ford and Perelman are an odd couple for the banking industry. Perelman is the swashbuckling, cigar-smoking deal maker whose holdings also include control of cosmetics giant Revlon Inc.
Ford, meanwhile, “is very low-key and not a self-promoter,” said Lehman’s Harting. “He comes across as a serious-minded, dedicated bank manager. No arrogant swagger, just a steady, even keel.”
Jerry Ford, born in the Texas Panhandle town of Pampa, became an attorney after getting economics and law degrees from Southern Methodist University in Dallas. But in 1975, he borrowed $1 million to buy a tiny bank in Post, Texas, and then bought several other little banks. That became First United Bank Group, which he sold to Norwest Corp. in 1994 for stock, including shares that enriched him personally by more than $80 million.
In the meantime, he had joined with Perelman to buy the Texas S&Ls; that became First Gibraltar, and in 1993 they sold most of that thrift to BankAmerica Corp. for $150 million. The following year, they bought First Nationwide.
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Combined Interests
The parents of Glendale Federal Bank and California Federal Bank announced a proposed $2.5-billion merger Thursday. The deal would make the combined company, Golden State, the nation’s third-largest savings and loan. The combined thrift would hold about 6.4% of the California market. The nation’s 10 largest thrifts and market share for California financial institutions:
Top California Financial Institutions
Deposit market share
BankAmerica: 20.7%
Wells Fargo: 13.8
HF Ahmanson: 8.6
Washington Mutual: 8.5
Golden State/CalFed*: 6.4
UnionBanCal: 5.1
Golden West Financial: 3.5
Sanwa Bank: 1.5
CitiCorp: 1.2
Top 10 U.S. Thrifts
Ranked by assets
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Total assets as of Sept. 30, 1997, Rank Institution Headquarters in millions 1 Washington Mutual Seattle $95.6 2 Ahmanson Irwindale 55.8 3 Golden State/CalFed* San Francisco 51.0 4 Golden West Financial Oakland 39.2 5 Dime Bancorp New York 19.4 6 Charter One Financial Cleveland 19.3 7 Standard Federal Bank Troy, Mich. 17.8 8 Citibank FSB San Francisco 17.6 9 Sovereign Bancorp Wyomissing, Pa. 16.7 10 Bank of America FSB Portland, Ore. 14.2
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*Post-merger
Source: SNL Securities
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* GLENFED DEAL: Thrift merger would create nation’s third-largest S&L.; A1
