OK Still Expected on Golden State Deal
The last-minute disclosure that there was another potential suitor for Golden State Bancorp isn’t likely to derail the company’s takeover by Citigroup Inc., but it has raised questions about whether Golden State’s investors were properly informed of their options.
Shareholders of Golden State, the San Francisco parent of savings and loan California Federal Bank, are expected today to approve an acquisition by Citigroup, despite news reports Wednesday that student loan firm Sallie Mae had tentatively offered to buy the firm in May.
Sallie Mae’s informal bid for Cal Fed now would be worth more than the cash and stock offer made by the world’s largest financial services firm, given the 20% decline in Citigroup’s stock since the deal was forged three months ago, according to the Wall Street Journal, which first reported the informal bid.
In its merger proxy statement for shareholders, Golden State mentioned a “preliminary acquisition proposal from a non-bank financial institution.” But the company didn’t identify the amount of the bid or the potential acquirer.
Those omissions may not sit well with all Golden State shareholders, some securities experts said.
“Shareholders would have the right to be upset with the level of disclosure in the proxy,” said Robert Heim, a former SEC enforcement attorney who is now with Meyers & Heim in New York. “It doesn’t give the shareholders enough information to weigh the offers.”
But others said that type of disclosure is common in merger deals, given confidentiality agreements involved in such bids.
“They would never disclose the identity of a possible acquirer,” said Scott Keller, president of New York-based DealAnalytics, which provides research on mergers. “This will have no impact on the vote.”
Golden State spokeswoman Janis Tarter declined to comment Wednesday, as did a Citigroup spokeswoman and representatives at the Securities and Exchange Commission.
Sallie Mae spokesman Jim Boyle said SLM Corp., which owns Sallie Mae, the government-sponsored enterprise that issues student loans, now has no interest in buying Golden State. SLM had retained investment bank J.P. Morgan Chase & Co. to look into possible acquisitions, he said.
Golden State’s large institutional shareholders such as TIAA-CREF and mutual fund giant Vanguard Group said Wednesday that they could not comment on the proxy vote or the disclosure issues.
The deal is expected to be approved because corporate raider Ron Perelman and Golden State Chairman Gerald J. Ford together own or control about 47% of the company’s stock and have already agreed to the Citigroup merger, analysts said. The men began investing in banks in the early 1990s and bought Cal Fed in 1997.
“At 47%, this deal is done. Citigroup [stock] is one of the more liquid securities on the planet and Ron Perelman needs cash,” said Charlotte Chamberlain, an analyst who follows Golden State for investment firm Jefferies & Co. in Los Angeles. “Anyone with more than a room temperature, if you asked, ‘Who do you want between Citigroup and Sallie Mae?,’ ” would say Citigroup, she said.
Sallie Mae offered to pay $5.7 billion for Golden State before Citigroup, in May, agreed to pay $5.8 billion in cash and stock, the Journal reported, citing unidentified sources. At today’s prices, Sallie Mae’s bid would be worth about $5.5 billion and New York-based Citigroup’s would be about $4.8 billion.
Citigroup’s takeover of Cal Fed would give it an additional 350 branches, mostly in California. Citigroup has just 82 branches in California and Nevada. If completed, the takeover would give Citigroup about $54 billion in assets.
The merger, which has drawn the attention of some community activists, must be approved by the Federal Reserve and the Office of Thrift Supervision, which regulates savings and loans such as Cal Fed.
Golden State shares rose 68 cents to $35.27 Wednesday, while Citigroup’s stock climbed 97 cents to $34.35. SLM shares fell $3.57 to $93.99. All three trade on the New York Stock Exchange.
