H.F. Ahmanson & Co. sought to turn up the heat on Great Western Financial Corp. Thursday, with full-page newspaper ads calling on the company to "Begin discussions with us NOW!"
Few believed that the ads, which appeared in The Wall Street Journal, the Los Angeles Times, and three other Southern California newspapers, would have any effect on Great Western. But observers said they underscored Ahmanson's desire to avoid a bidding war and get the deal done quickly.
The merger would nearly double Ahmanson's assets to $92 billion.
"The quicker Ahmanson gets this done, the less they will have to pay," said Chad C. Yonker, an analyst at Fox Pitt Kelton.
Each day that passes gives a possible third-party bidder more time to evaluate Great Western and ultimately make an offer. This would drive up the price for Great Western and possibly lead to a bidding war, analysts said.
Great Western, however, did not seem to appreciate Ahmanson's exhortations. "It's their shareholders' money. If that's the way they want to spend it, that's their business," said Ian Campbell, a Great Western spokesman.
Observers said another reason Ahmanson is pushing for a quick resolution is that third-party bidders typically secure a breakup clause that requires the ultimate winner to pay the third party a substantial fee for its trouble.
That's what happened last year when Wells Fargo & Co. beat First Bank System Inc. to acquire First Interstate Bancorp. Wells had to pay First Bank a $200 million breakup fee.
Ahmanson is trying to avoid this. In a lawsuit filed at the time of the bid last week, Ahmanson sought to have Great Western shareholders support a bylaw change that would put a $100 million cap on any breakup fee to another bidder.
Great Western sought to block that attempt Wednesday with a countersuit, calling Ahmanson's actions "illegal" and an "improper intrusion into the statutory powers of the board of directors."
Ahmanson would also like to close the deal quickly for personnel reasons, analysts said. The longer it takes, the more time Great Western employees would have to find jobs elsewhere, they noted. Most of Great Western's top executives would probably move on, but Ahmanson might like to keep some Great Western employees in key areas, such as the consumer finance subsidiary, analysts said.
As the days passed this week without any sign that a white knight was riding to Great Western's rescue, some observers said Ahmanson's offer is too tough to beat.
"The fact that no one has come forward indicates to me that Ahmanson gave them a pretty full price," said an institutional shareholder with a large stake in Great Western. Not until 19 days after Wells' initial offer for First Interstate did First Bank make its white-knight bid. Thursday marked day 10 in Ahmanson's run at Great Western.
