PASADENA, Calif. -
Glatt's credit union was the target of what is believed to be the CU movement's first hostile takeover attempt earlier this year. The well-publicized maneuver ended-apparently-when NCUA ruled the $200 offer to each Continental FCU member by Wings in exchange for support of a merger of Continental into Wings Financial was not allowed.
According to Glatt, the next hostile takeover attempt could be just around the corner. "My concern is, the industry thinks it is over," he told the Credit Union Journal. "We must keep talking as an industry. We must encourage NCUA to continue what it started and come up with directives."
What is next for Continental FCU? Glatt says the credit union continues to work on its strategic plan and is expanding options for its members. On May 7, it opened a new branch in Houston, Texas, and soon will have ATMs in the Charlotte, N.C., airport. In addition, Glatt said Continental is in the process of negotiating to purchase a location in Philadelphia, as well as space in the Phoenix airport.
Glatt says he understands why Wings Financial attempted to forcibly merge his credit union, but "I just don't know why they did it the way they did it."
History Of Merger Proposals
He told WesCorp's CFO Forum here the management and board of Continental had declined merger proposals made by Wings Financial on four occasions dating back to 1998.
"At what point does 'no' mean 'no?'" he asked. With its actions the morning of Friday, March 9, Glatt said Wings Financial crossed a line.
"They can call it a merger proposal all they want, but this was an attack; a hostile takeover," he declared. "The most despicable thing they did was tell our employees, 'You'll be taken care of when Wings takes over.' That made our employees feel I had sold them out without even telling them."
On the fateful morning, Glatt was in Florida preparing for a speaking engagement. Wings Financial's preparation was so complete, he said, a Fed Ex package was delivered to his hotel room.
"That Friday, our doors opened at 8 a.m., and three representatives from Wings were waiting. They dropped in with 10 packages for our board, then they tried to hand out fliers to our members in the lobby. They were appalled when we kicked them out, then tried to hand out fliers in our parking lot.
"I will never forgive them for that," he added.
Glatt also faulted Wings Financial for sending out a press release before Continental's board of directors had an opportunity to examine the packages delivered the morning of March 9. Glatt received a phone message from a reporter seeking his comment on the "merger" before he knew what was happening.
He found the nature of Wings Financial's communication to be deeply disturbing. He paraphrased the message as: "If you don't agree to merge, we will get enough signatures to remove your board and then vote for it."
Support for Continental came from all sectors, including some unexpected sources, Glatt continued. He praised Bill Cheney and the California CU League for staunchly defending Continental, and he said phone calls with industry leaders were uplifting. In addition, he said a representative from Wells Fargo dropped by to offer help.
"He said, 'This is wrong. We wouldn't do this,'" reported Glatt, who added he received an e-mail from a vice president at Bank of America who formerly worked at a CU who said she was "appalled and offended" at Wings Financial's actions.
Why did Wings Financial want to take over Continental? Glatt said the merger would have given Continental a "tremendous" national branch network because his CU had a presence in many states Wings Financial did not.
"But we are members of FSCC, so our members have access to 2,400 branches," he said. "The second reason was, my credit union had an obscene amount of net worth: 17%. The 17% net worth was at the expense of the membership-we weren't members of enough partnerships. The third reason was we have the same charter, the air transportation industry. But because of this, our members could have been members of Wings already."
On Monday, March 12, Glatt said Continental's board and management performed due diligence to see if there was value for its members. Continental's annual meeting took place March 27, and drew triple the normal number of participants.
Annual Meeting Attendance Pops
"It was 70 people, but that was three times what we usually get," he said to laughter. "And those people were against the merger. That Friday, Wings withdrew their merger proposal. They will blame NCUA for saying the $200 bribe was impermissible, but they were getting nowhere with our members."
The takeover attempt failed due to four "gross miscalculations" by Wings Financial, Glatt insisted. First, Wings "underestimated my board and my staff. They thought the board would cave in the first day, but they protected the membership. Our staff never got distracted from serving the membership."
Second, Glatt said Wings underestimated the industry response. "They thought it would be seen as between Wings and Continental. If this takeover had been allowed to go through, the credit union movement would have died on March 12. Navy Federal would have bribed members, bought capital, then B of A would have bought Navy and it would be all over."
Third, Wings underestimated Continental's members: "they thought our members would leap through a hoop for $200 of their money. Our members figured out they already had a great deal."
Fourth, Wings underestimated the regulator response. "To be honest, so did I," Glatt said. "Based on my first conversation, I didn't think NCUA would move."
To this day, Glatt said he thinks, "It just couldn't have happened this way-another credit union doing this to a credit union.
"Why did they do it? Because there was growth potential for Wings," said Glatt. "They had nowhere to go, and saw Continental as a way to grow. When Wings converts to a mutual savings bank, they would have more assets. Don't tell me personal greed was not a part of this. Just look at the public comments Wings' management has made about the mutual savings bank charter."
Wings Financial representatives were unavailable for comment at press time.
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Read more about what the Wings-Continental situation and other developments could mean for the credit union movement as a whole atcujournal.com and searching the following bolded terms:
* Hostile Takeover
* Long-term Forecast
