H.F. Ahmanson & Co. on Monday escalated the war of words in its hostile bid for Great Western Financial Corp., but failed to gain a decisive advantage over rival Washington Mutual Inc.
Ahmanson's main line of attack was to quarrel with projected cost savings and revenue gains outlined by Washington Mutual. Chief executive officer Charles R. Rinehart called the numbers "absolutely unprecedented" and "absurd."
Ahmanson shares rose only 25 cents, to $42.375, after Mr. Rinehart made an impassioned sales pitch in an hour-long meeting with Wall Street analysts. Washington Mutual shares, meanwhile, climbed $1.50 to $54.375. Great Western shares closed up 50 cents, at $48.
Arbitragers characterized the stock movements as largely technical in nature, and said they did not amount to a clear endorsement of either bid.
The market's response in the next few days will be crucial in determining Chatsworth, Calif.-based Ahmanson's next move in its effort to undo Washington Mutual's $6.8 billion definitive agreement with Great Western.
If Washington Mutual's stock stays at its current price or gains and Ahmanson's doesn't rise significantly, then Ahmanson will likely counterbid, observers said.
In the meeting with analysts, Mr. Rinehart took strong exception to Washington Mutual CEO Kerry Killinger's description of Ahmanson's strategy as "slash and burn."
"I would describe theirs as 'hope and pray,'" Mr. Rinehart said. "Hope for cost savings and pray for revenue enhancement."
Mr. Rinehart and his chief financial officer, Kevin Twomey, attacked Washington Mutual's projections on several fronts, saying Washington Mutual's estimated cost-savings and revenue gains "don't travel well together."
On the expense side, for example, Washington Mutual's numbers suggest that it can achieve 85% of the cost-saves that Ahmanson could, with only half the branch overlap that Ahmanson has with Great Western, the Ahmanson officials said.
Ahmanson said Washington Mutual's anticipated $250 million of revenue gains is nearly twice the industry norm for such mergers. "Most transactions don't rely on revenue enhancement," Mr. Twomey said. "This one does in spades-and what they're contemplating is just absurd."
Mr. Rinehart also questioned Washington Mutual's management bench strength, and the company's capacity to grow more than 400% in one year. He pointed out that Mr. Killinger has only done two deals valued at more than $700 million.
The Washington Mutual camp refrained from returning Ahmanson's verbal volley. A spokesman said the Seattle company would comment today, after it files more details of its deal with the Securities and Exchange Commission. Washington Mutual's agreement to buy Great Western has already been approved by both companies' boards.
For its part, Ahmanson has purchased more than $8 billion of deposits in recent years, Mr. Rinehart said, most recently buying 61 branches divested by Wells Fargo & Co. after it bought First Interstate Bancorp.
However, Ahmanson has not done any transactions even remotely comparable to acquiring a company the size of Great Western.
Mr. Rinehart also took the unusual step Monday of divulging what Ahmanson expects to earn in the first quarter-about 75 cents a share, about 5 cents more than analysts' expectations.
Meanwhile, many of the investors and analysts attending the Ahmanson presentation Monday seemed to be suitably impressed by it.
"I thought he did a heck of a job," said Thomas O'Donnell, an analyst with Smith Barney. "I'd give him six (out of six) on artistic impression and a 5.8 on technical merit. He was very believable."
But Jeffrey Naschek, an analyst with Salomon Brothers, was not convinced. "I don't agree with Ahmanson that Washington Mutual's numbers are too aggressive," he said. "For one, potential cost savings can go well beyond simple branch overlap. One company could have much cheaper loan origination costs, for example."
At Monday's closing prices, Washington Mutual's offer is now worth $48.94 per share; Ahmanson's is worth $44.49.
