For sale-one more big California thrift.
That's how analysts are reading Glendale Federal Bank's decision Tuesday to spin off to its shareholders most of the expected winnings from a lawsuit against the federal government.
For each share held, Glendale will give shareholders one warrant that entitles them to 85% of the thrift's winnings, after taxes and expenses. Glendale expects to issue the shares early next year.
With the move, Glendale is "screwing in the neon bulbs" into its for- sale sign, said analyst Charlotte A. Chamberlain of Jefferies & Co., Los Angeles.
She named Seattle-based Washington Mutual Inc. and H.F. Ahmanson & Co., Irwindale, Calif., as likely bidders.
Caren Mayer, an analyst with Montgomery Securities, agreed the move would make it easier for Glendale to sell itself. That's because Glendale's shares, which gained $1.375, to $35, in Wednesday trading, reflect investors' bet on how much Glendale will win from the federal government and their estimate of the $16.4 billion-asset thrift's franchise.
Separating the two would make it easier for a potential buyer to value the franchise, Ms. Mayer said.
Glendale's suit against the federal government dates back to the 1989 thrift reform law that forced Glendale to take a hit on capital for buying failed thrifts.
Glendale won an important Supreme Court,victory in its suit last year, and a federal judge who will set the damages recently said Glendale has a very strong case.
Ms. Chamberlain said the thrift's chairman, Stephen J. Trafton, has always wanted to sell the company. He decided to smooth the path to a sale now because a legal victory is imminent and the pace of thrift consolidation is heated, she said.
Ms. Chamberlain said Mr. Trafton appeared to have structured the spinoff in a way that would enable Washington Mutual to buy Glendale and account for the transaction as a pooling of interests.
But both Washington Mutual and H.F. Ahmanson are digesting other big deals. In Washington Mutual's case, that's Great Western Financial, Chatsworth, and in Ahmanson's, it's Coast Savings Bank.