Ahmanson The Winner In Wells Sale Of Branches

H.F. Ahmanson & Co. won the bidding for the 61 California branches Wells Fargo & Co. is divesting in conjunction with its merger with First Interstate Bancorp.

The deal is a coup for Irwindale, Calif.-based Ahmanson, parent of $50.5 billion-asset Home Savings of America, which is breaking out of the mold of a mortgage-oriented thrift company to become a more rounded retail bank.

Ahmanson, the nation's biggest thrift company, is paying $206 million, a premium of 8.11% on the 61 offices' $2.5 billion of deposits. They also come with $1.3 billion of loans.

An investment banker who represented an unsuccessful bidder for the branches, and asked not to be named, rated the premium as "rich - more than twice the 4% paid in comparable transactions in the past."

Ahmanson chairman Charles R. Rinehart said that although his company submitted the highest bid, one other offered a premium above 8%. He did not name that bidder.

He said the deal would probably close in the third quarter and be accretive to earnings this year. Ahmanson is using more than $750 million in pretax proceeds from its own recent branch divestitures in Illinois and New York, on which it also received premiums in excess of 8%.

With the former First Interstate outlets, and before some planned closings, Home Savings would be increasing its full-service branches in California by 23%, to 323; and deposits in the state by 9%, to $29 billion.

Mr. Rinehart called the agreement "a terrific opportunity" that gives Ahmanson a "springboard to accelerate its transition into commercial banking."

The Justice Department and California's attorney general required Wells to divest the branches to preserve competition, particularly in small- business lending.

Ahmanson, like most other major California thrifts, is new to small- business lending and many other kinds of nonmortgage consumer credit. Its win of the First Interstate auction surprised observers, who thought regulators would prefer a commercial bank buyer.

More than a dozen organizations entered the bidding. Nine - three thrifts, five banks, and one consortium of community banks - were finalists.

Alan Fisher, executive director of the California Reinvestment Committee, a San Francisco-based affordable housing advocate, said he plans to protest Ahmanson's acquisition on community reinvestment grounds. He noted that the company has stopped making multifamily loans for subsidized affordable housing. (See page 8.)

Mr. Rinehart said he was confident that the Office of Thrift Supervision and the Federal Deposit Insurance Corp. will approve the transaction, because they will view Ahmanson as a potentially strong, customer-service-oriented competitor.

In the fall, Home Savings received an "outstanding" community reinvestment rating. Mr. Rinehart said the approximately $200 million of subsidized multifamily affordable housing loans made by the thrift are a tiny part of Ahmanson's overall lending to minorities and the poor.

About 70% of the deposits to be acquired are in San Diego, Sacramento, Kern, Riverside, and Ventura counties. The acquisition would increase Ahmanson's San Diego market share from 11% to 13.7%; its Sacramento share from 4.1% to 8%; its Kern share from 8% to 17.9%; its Riverside share from 9.95% to 11.7%; and its Ventura share from 12.8% to 15.3%.

The acquisition would bring 214,000 households into the Ahmanson network. Mr. Rinehart said all of the 781 First Interstate employees in the branches would be offered jobs at Ahmanson.

Ahmanson anticipates closing as many as 27 branches after the acquisition and taking a related restructuring charge of 6 cents to 9 cents per share. Mr. Rinehart said most of those would be Home Savings facilities near First Interstate branches.

Aside from the current 262 California branches, Ahmanson has 81 in three other Sunbelt states.

Regulators required Wells Fargo to obtain divestiture agreements before completing its merger, which is scheduled for April 1.

San Francisco-based Wells cleared another hurdle for the merger Thursday morning when more than 98% of First Interstate shareholders voting approved the deal. Wells shareholders were expected to approve it Thursday afternoon.

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