Last week's deal between California Federal Bank and Golden State Bancorp was so complex it was difficult to say which agreed to acquire which.

In fact, in analyzing the planned reverse merger-which uses a "collar" formula and the transfer of tax benefits dating back to late-1980s thrift bailouts to determine how the ownership would be divvied up-The New York Times suggested that it was CalFed that had sold out, and that the price was a bargain.

But CalFed chairman Gerald J. Ford, who would take over management of the combined company, said the deal for Golden State's $20 billion-asset Glendale Federal was a "fair one" that gives his group a leg up in the ongoing consolidation among thrifts in the state.

The heart of the confusion is that Mr. Ford and his partner, financier Ronald O. Perelman, would give Golden State shareholders the bigger stake in the combined $50 billion-asset company, even though Golden State's thrift, Glendale Federal, is the smaller of the two. What's more, the new company would retain the Golden State Bancorp name.

Heading back to his headquarters in Texas after laying out the deal to investors in New York and Boston last week, Mr. Ford said the basic principle of the deal was to figure out "the earning powers of the banks" and to "split the baby on that basis."

CalFed, with $31 billion of assets, is a third larger than Glendale and generates more revenue, but its income is smaller than Glendale's because CalFed is heavily leveraged, Mr. Ford said. Servicing the debt and preferred securities takes a big chunk out of CalFed's revenues.

Mr. Ford and Mr. Perelman may end up with a minority share of the new thrift, but they would certainly be in charge. They would nominate 10 of the 15 Golden State Bancorp directors.

CalFed's president and chief operating officer, Carl B. Webb, would run the combined thrift. Mr. Ford would be chairman and chief operating officer at Golden State, as he is at CalFed.

Mr. Ford and Mr. Perelman entered California through their 1994 purchase of Ford Motor Company's First Nationwide unit, which had $12 billion of assets. They have expanded statewide and increased assets to $31 billion, buying three other thrifts-San Francisco Federal, Home Federal, and California Federal Bank. They have also taken on the CalFed name.

At each step, thrift watchers have debated when and to whom the opportunistic financiers would finally sell out.

Mr. Ford confirmed in the interview that last year he and Mr. Perelman explored an initial public offering that would have let them sell all or part of their stake in CalFed to public shareholders. But when Glendale approached them with a merger offer, the financiers concluded that merging with a public company would get them the publicly traded currency they wanted to do more acquisitions. The deal would also afford them more size and efficiencies.

"We decided this gave us more" than an IPO would, Mr. Ford said.

He said the two sides had been unable to agree on how much Glendale is really worth once the anticipated damages on its goodwill suit against the federal government are factored out of its stock price.

They resolved their differences by setting up a "collar": If Glendale's stock is worth $32 or less in a specified period after the goodwill litigation tracking warrants have been issued, its shareholders get 55% of the combined company.

At $33 or more, they get 58% of the company.

"It left us a market mechanism" to resolve the dispute, Mr. Ford said.

Glendale's shareholders would end up with close to market price for their shares. The real payoff, analysts say, is in the future when the combined franchise is sold at a rich premium, perhaps to an out-of-state bank looking for a California toehold.

To boost its low book value, the new Golden State Bancorp would be looking to buy small capital-rich thrifts, such as Firstfed Financial Corp., Santa Monica, Calif., and Quaker City Bancorp, Whittier, Calif., in which the state's other consolidators-Washington Mutual and H.F. Ahmanson - have shown no interest, said analyst Charlotte A. Chamberlain of Jefferies & Co.

Mr. Ford and Mr. Perelman would also stand to increase their share of the new company as it recognizes $1 billion in tax benefits they acquired when they bought insolvent thrifts from the government. As the tax benefits are recognized, Mr. Ford and Mr. Perelman would be compensated with equivalent stock.

Analyst Campbell K. Chaney of Sandler O'Neill & Partners estimated the net-operating-loss carryforwards that stem from Mr. Ford's and Mr. Perelman's acquisition of Gibraltar Savings in 1988 are worth $350 million in forgone taxes. That figure could boost their share of the combined company to as much as 49%, assuming Golden State shares trade at $35, he said.

The losers in this transaction would be competitors, such as Washington Mutual and Golden West Bancorp., Mr. Chaney said, because they would gain a formidable new rival in the mortgage business.

Mr. Chaney also counts the U.S. government among the potential losers, because Glendale chief executive Steve Trafton would spearhead not only his own thrift's goodwill suit against the government, but CalFed's as well.

Addressing himself to Glendale shareholders in the analyst conference call last week, Mr. Ford said Mr. Trafton was "the most intractable negotiator I've ever come across, and I've bought a few banks."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.