Providian Shareholders Approve Takeover by Washington Mutual

Providian Financial Corp.’s shareholders on Wednesday accepted Washington Mutual Inc.’s $6.5-billion takeover bid, brushing aside concerns that one of the nation’s last independent credit card lenders could have been sold at a higher price.

A total of 197.5 million Providian shares, or 67% of the common stock outstanding, supported the deal, clearing the way for Washington Mutual to complete the acquisition Oct. 1.

San Francisco-based Providian announced the vote during an uneventful 10-minute special meeting that ended several months of debate about whether Seattle-based Washington Mutual -- the nation’s largest savings and loan -- was paying enough to buy a credit card company that would help it diversify beyond home mortgages.

Investors began to express misgivings about the sale price almost as soon as Washington Mutual had unveiled its cash-and-stock bid of $18.71 a share. That was 4% above Providian Financial’s stock price before the deal was announced in early June, an unusually low premium.

After slipping after the company first struck the deal, Washington Mutual’s shares have bounced back. Shares rose 44 cents Wednesday to $41.58, while Providian added 24 cents to $18.60.

After nearly failing in late 2001 amid an avalanche of loan problems, Providian bounced back under a new management team that boosted the company’s profit by cleaning up the credit card portfolio and cutting costs in a streamlining that shed about 10,000 workers.

Providian now employs 3,200 workers, most of whom are expected to be retained. The credit card issuer has 9.5 million account holders with $18.6 billion in outstanding loans through June.

The complaints about Providian’s price amplified this summer after Bank of America Corp. agreed to buy MBNA Corp. for $35 billion -- a 31% premium. Some analysts say the deal isn’t an apples-to-apples comparison with Washington Mutual’s bid for Providian because MBNA’s loan portfolio is less risky.

Nevertheless, Putnam Investments, one of Providian’s largest shareholders, with a 7.5% stake, took the unusual step of publicly opposing the Washington Mutual bid, hoping to force Providian’s board to get a better offer.