H.F. Ahmanson & Co's three-and-a-half month battle to buy Great Western Financial Corp. could boil down to the outcome of a hearing today in Delaware Chancery Court.
Ahmanson will ask the Delaware Chancery Court to require Great Western to postpone its June 13 shareholder vote at 10 a.m. on its merger agreement with Washington Mutual for eight to 10 weeks. Great Western management signed an agreement with Washington Mutual as an alternative to Ahmanson's Feb. 18 hostile bid.
Ahmanson hopes to elect directors to Great Western's board at the June 13 annual meeting who would be sympathetic to its cause. Delaying the merger vote would give the new directors time to make a case with Great Western's board and management.
Without a postponement, that strategy-key to Ahmanson's hostile bid from the start-would be neutralized because the friendly directors wouldn't be elected to Great Western's board until a few hours after the merger vote.
The case will be heard by the Court's second ranking judge, Vice Chancellor Jack B. Jacobs, who is described as a "no-nonsense judge," likely to ask pointed questions of both sides.
An Ahmanson spokeswoman said the Irwindale, Calif.-thrift "will reevaluate and decide what happens next," if it does not prevail in court.
In a 56-page brief filed before the Delaware court, Ahmanson argues that Great Western's delay of the annual meeting eliminated "any opportunity for stockholders to introduce new voices on the GWF Board at a time that is at all meaningful."
Great Western postponed its annual meeting for seven weeks, so it could squeeze in a merger vote before the annual strategy, Ahmanson argues. But in doing so, Great Western's directors violated one of their own bylaws that requires them to promptly reschedule a delayed annual meeting, and also their fiduciary responsibility, Ahmanson will argue.
The Irwindale thrift company will argue that Great Western's shareholders appeared to support Ahmanson's slate of directors, when they backed an Ahmanson-sponsored proxy proposal that would have required an annual meeting by May 6, that is, within 2 weeks of the originally scheduled April 22 meeting date.
For its part, Great Western will argue that its board's actions are accepted as standard defenses to hostile bids, and have been upheld by courts in the past, a source close to Great Western said.
Moreover, Great Western will argue that shareholders who prefer a merger with Ahmanson over Washington Mutual can take advantage of Ahmanson's tender offer and exchange their shares for Ahmanson's.
Finally, postponing the merger meeting, will hurt shareholders by delaying their profits on the deal for as much as two months, Great Western will argue.
One merger lawyer said he believed Ahmanson will find it tough going in the courtroom.
"They've raised some very good points, but I think its a stretch for making a case for delaying the special meeting," Ronald H. Janis, partner at Pitney, Hardin, Kipp & Szuch, Morristown, N.J. u