Having been shut out of Great Western Financial Corp.'s boardroom, H.F. Ahmanson & Co. is now trying to jimmy the door open.
Ahmanson, of Irwindale, Calif., is trying to get three people elected to Great Western's 11-member board of directors in an effort to pressure the thrift to the negotiating table.
But getting a minority position at the table is still a long way from seizing control, longtime observers of friendly and hostile mergers in banking and other industries point out.
Electing dissidents to boards has in the past forced companies unwilling to sell to change their minds, observers note. But the fact that Great Western, of Chatsworth, Calif., is willing to sell-it has signed a deal to merge with Washington Mutual Inc.-greatly reduces the influence of Ahmanson's clique, they believe.
Getting on the board could help Ahmanson. Its hostile bid is only slightly higher than Washington Mutual's friendly offer. The two thrifts' stocks are trading almost identically, and neither side seems to have much new information with which to persuade investors.
"If shareholders were to elect three people, it could certainly change the dynamics of the boardroom," said Victor Lukow, who advises on bank mergers at the New York law firm Cleary, Gottlieb, Steen & Hamilton.
But there are many examples of split bank boards where the majority was able to defend management against hostile factions.
Compass Bancshares and Commercial Federal Corp. recently emerged from proxy fights, observed Edward D. Herlihy, senior partner at the New York law firm Wachtell, Lipton, Rosen & Katz. And in neither case did the dissident board members get what they wanted.
At Compass, a $10 billion bank in Birmingham, Ala., founder and director Harry Brock, along with his son and another board member, wanted the bank to sell to First Union Corp. The majority of the board disagreed, and isolated the dissident faction by making board meetings empty exercises.
"There are many things you can do to isolate dissidents on a board," said one attorney who specializes in bank mergers. "There's nothing to stop you from delegating real authority to committees and making full board meetings a charade."
At Commercial Federal, a $6 billion thrift based in Omaha, an investment firm called CAI Corp. last year sought to place two members on the board to force the bank to sell. In the end, Commercial Federal bought out the dissident faction and remained independent.
Still, board pressure isn't always futile. Investment bankers say the original impetus to sell Meridian Bancorp. to CoreStates Financial Corp. came not from management, but an impatient board member.
And Great Western has experience with dissident board members blowing up deals. In 1985 the thrift agreed to buy Citadel Holding Corp., a thrift company in Glendale, Calif. But a dissident board member at Citadel argued the deal wasn't lucrative enough and it was nixed.
Great Western eventually won a $6 million settlement in court.
Eight of the thrift's current directors served on the board during that fight.
"If there's anybody who should know how to deal with dissidents, it's Great Western," said an investment banker not involved with the thrift.
It is this history, combined with Great Western's agreement with Washington Mutual, that makes Ahmanson's bid for places on the Great Western board "a nonevent," said one attorney involved in many bank mergers over the years. "As a practical matter, it means very little in ultimately acquiring control," he said.
The question is how united the Great Western board really is. Ahmanson's presence alone is unlikely to convert any Great Western board members to its cause, but observers say such a presence would help Ahmanson by planting doubts in directors' minds about the viability of Washington Mutual's offer.
Because Ahmanson is relegated to making that argument through the press now, the chance to do it face-to-face in a boardroom carries undeniable advantages, they say.
"It's human nature to sit down and listen to someone if they have something reasonable to propose. Reasonable people can do these things," said Ronald H. Janis, attorney at Pitney, Hardin, Kipp & Szuch, Morristown, N.J., a veteran of many bank mergers.
Investment bankers not connected to the protracted fight in California believe the fate of Great Western will ultimately be decided by the votes of arbitragers.
Although there is no way to prove it yet, veterans of merger battles suspect longtime shareholders have been cashing out since news of the hostile bid boosted Great Western's stock price. All other factors being nearly equal, investment bankers say arbitragers are likely to support whoever offers the highest bid.
"The Great Western board has a certain amount of latitude in not voting for the highest price," said Gerard L. Smith, managing director at UBS Securities. "But with three dissidents on the board, every board member will retain their own counsel. And every lawyer will tell them they can't ever be faulted if they vote for the highest bid."
