Ahmanson raises bid for Great Western Washington Mutual's friendly offer is topped

Thrift industry

March 18, 1997|By BLOOMBERG NEWS

IRWINDALE, Calif. -- H. F. Ahmanson & Co. raised its hostile bid for rival California thrift Great Western Financial Corp. to $6.66 billion yesterday, topping a friendly offer from Washington Mutual Inc.

Ahmanson said it would pay about $50 a share in its stock for each Great Western share, with the value of the offer changing along with the price of Ahmanson stock. Washington Mutual offered about $45.34 a share, or $6.25 billion.

"Ahmanson's is obviously a more attractive offer," said William Rubin, a portfolio manager at Fidelity Investments, one of the largest shareholders of Ahmanson and Chatsworth, Calif.-based Great Western. "I believe Washington Mutual will come back with a higher bid."

The higher Ahmanson bid, which was expected, extends the fight for Great Western that began Feb. 17 with Ahmanson's unsolicited offer of 1.05 shares. California thrifts, which racked up huge losses a decade ago, are merging rapidly as they seek to cut costs and expand into new markets.

Seattle-based Washington Mutual won't raise its bid because it expects Great Western's shareholders to approve its takeover agreement soon, said Washington Mutual spokesman Bill Ehrlich.

Great Western, which has snubbed Ahmanson's advances all along, chided Ahmanson for trying to limit its "flexibility and alternatives" and said its board will review the new offer.

Ahmanson, the nation's biggest thrift, closed down 12.5 cents at $39.75 yesterday. Great Western fell 25 cents to $45.25 and Washington Mutual rose 75 cents to $51.125.

Even after paying $195 million in fees tied to the breakup of Great Western's agreement with Washington Mutual, Ahmanson could boost profits, cut costs and increase revenue far more than Washington Mutual could, Ahmanson executives said.

"Our hope is that Great Western's board will recognize its fiduciary responsibility and sit down with us and negotiate an agreement," said Chief Executive Officer Charles Rinehart.

Though Washington Mutual won't rule out any option, it expects its bid to stand and be put to a shareholder vote soon, Ehrlich said.

"We're not even considering [raising] it because we have a binding agreement," he said.

Under the offer, Ahmanson would pay $50 in Ahmanson stock for each Great Western share if its shares are priced between $41.67 and $45.45.

Should Ahmanson stock trade at $41.67 or less, Great Western shareholders would receive 1.2 shares of Ahmanson for each of their shares. Should its shares rise above $45.45, Ahmanson would pay 1.1 of its shares for every Great Western share.

The new bid could be attractive to Great Western shareholders because the amount of stock they would receive would vary depending on Ahmanson's stock price, analysts said. Investors might like that since they would be assured some protection if Ahmanson shares fell and would benefit if the shares rose.

"If Ahmanson's stock goes up, the value of the deal goes up," said Jeffrey Naschek, a Salomon Brothers analysts.

Ahmanson executives told analysts that their company would be able to cut costs by merging with Great Western more than originally expected, after studying information that has emerged since the agreement with Washington Mutual was disclosed.

Ahmanson, which has said it would close 200 branches in a takeover, now expects to cut costs by $454 million a year, about $50 million more than earlier projections.

The company also said it would be able to boost annual revenue by $50 million, by generating more loans and raising fees.

Washington Mutual's bid was already being questioned by analysts and investors skeptical of its promises to cut costs and boost revenue as it absorbed Great Western.

Washington Mutual said it expected to slash annual costs by $340 million, including closing 200 branches and loan offices, and reap an additional $98 million in revenue.

Pub Date: 3/18/97

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