H.F. Ahmanson chairman Charles R. Rinehart acknowledged Thursday that his thrift needs a substantial shift in market sentiment to prevail in its hostile bid for Great Western Financial.
Alternately weary and defiant in an interview at American Banker, Mr. Rinehart said to beat out friendly bidder Washington Mutual Inc., the value of Ahmanson's offer must pull ahead of Washington Mutual's by more than 5%.
"We think the greater weight is on us," Mr. Rinehart said. "Because Washington Mutual currently has a deal, we have to open up a spread against them."
His comments come at a critical juncture in a bidding war that has preoccupied the nation's three largest savings and loan associations for nearly two months.
The competing deals have been running neck and neck lately in terms of value, but at day's end Thursday, Ahmanson was approaching Mr. Rinehart's target.
The Ahmanson bid seemed to gain momentum on its word Wednesday that it is succeeding in a consent solicitation to force a shareholder meeting by May 6. Ahmanson would nominate a slate of directors at the meeting.
At an exchange rate of 1.2 Ahmanson shares to each Great Western share, H.F. Ahmanson's deal was worth $44.7 per share at the close of trading Thursday. Washington Mutual's deal was 4% less at $42.975 per share, at the exchange rate of 0.9 shares.
"To me it's a lot like World War I. Both sides are in the trenches, gaining 50 yards at a time and neither getting a decisive breakthrough," the 50-year-old executive said of the contest. "The real key will be where the stock market trades the value of the deals."
Though investors usually favor deals which, like Ahmanson's, are based on in-market cost savings and share buybacks, getting their vote of confidence has been tough for the Irwindale, Calif. company.
"We're facing a halo effect with Washington Mutual," Mr. Rinehart said, because of the Seattle thrift's track record of delivering on previous purchases.
Though recent earnings show that Ahmanson also delivers, he said, "I wish we had a couple of years of this track record rather than a couple of quarters." Ahmanson has sharply increased checking accounts and consumer loans and held its expenses in check over the past few quarters.
Sounding angry at times, Mr. Rinehart accused Washington Mutual and Great Western of "kicking up dust," rather than allowing a fair comparison of the two deals.
Specifically, he said, Washington Mutual's charge that H.F. Ahmanson would be thinly capitalized after the deal is based on "naive" assumptions, at best.
Ahmanson doesn't intend to expand assets at the combined institution, as Washington Mutual projects it will, Mr. Rinehart said. Instead, Ahmanson would let lower-yielding mortgages run off to be replaced by more profitable consumer loans, much as it has done with its own balance sheet lately.
One of Washington Mutual's advisers reiterated, "you're taking one of the lowest (tangible capital) ratios in the industry and the whole strategy revolves around buying back stock. That won't exactly strengthen his balance sheet."
Asked why he hadn't negotiated with Great Western instead of making a hostile offer, Mr. Rinehart said the two thrifts had discussed a combination over the years, but without results. Most recently, he said he was rebuffed by Great Western's CEO, John Maher, in a conversation at the end of 1995.
Mr. Rinehart said Mr. Maher's attitude was that merging with H.F. Ahmanson would be a step backward, because Great Western was ahead in the race to become more banklike.
"For a lot of the early part of the '90s, they were," Mr. Rinehart observed. "They had the checking account activities they started in the late '80s, and they had consumer loans on the balance sheet.
" I think it was hard for them to step up to the fact that we've caught up and passed them," he said.
Mr. Rinehart said he regretted the reaction to his comments about job cuts at Great Western. "There never was a statement anywhere that Great Western employees would feel all the job losses," he asserted.
Mr. Rinehart acknowledged the battle has been a grind.
"I haven't set foot in one of our branches in 2 months. I don't like that," he said. "There are times when I've said, 'I wish we'd just toss a coin and get on with it, so one of us gets it and the other one can go on and do their thing."
Still, Mr. Rinehart was pressing the battle. He challenged Great Western again to talk to H.F. Ahmanson: "They keep talking about how much better the Washington Mutual deal is than the Ahmanson deal. My only question is: 'if it's all that much better, why are they so unwilling to let shareholders pick?'"