As the battle for Great Western Financial Corp. intensifies, investors are struggling to choose between two fundamentally different merger strategies.

One option is H.F. Ahmanson's $6 billion hostile offer, which promises big savings in operating costs. The alternative is Washington Mutual Inc.'s $6.6 billion white-knight deal, which assumes hefty gains in revenue for the merged company.

"In the near term, the two bids are very similar," said Bill Rubin, a portfolio manager at Fidelity Investments, which owns 6% of Great Western stock, 8% of Washington Mutual's shares, and 2.5% of Ahmanson's stock.

"In the longer term, a growth story may be preferred, which would mean taking Washington Mutual's offer," he added. "But that's offset by the potential for Ahmanson/Great Western to be acquired itself in the next year to 18 months."

The views of institutional investors like Mr. Rubin are sure to play a big role in the final outcome of the battle. That's because they can dramatically affect stock prices-and thus the value of any given deal.

Great Western shareholders-about 70% are institutional owners-were still weighing the offers Friday. Most anticipate a counteroffer from Ahmanson, perhaps as early as this week.

Ahmanson, meanwhile, was girding for a public relations battle to win over Great Western investors. It planned to meet with investors today in New York.

Ultimately, observers said, the contest will come down to which operating strategy investors like the most: boosting revenue of cutting costs.

Seattle-based Washington Mutual said that while it wouldn't be able to cut as much in expenses as Ahmanson, it could enhance revenue by $222 million in 1998.

Ahmanson, by contrast, has built its offer on the potential cost-savings it could achieve from consolidating much of the two companies' retail network in California and Florida.

Ahmanson has estimated $400 million in cost-savings by 1999, compared with Washington Mutual's estimated $340 million.

The winner, which could be decided in a proxy fight, will become the largest thrift in the country with about $90 billion of assets. The loser, perhaps more so in Ahmanson's case, faces the prospect of being taken over itself.

Observers said both companies could probably up their offer prices, though Washington Mutual may be reluctant to do so because of the consequent dilution to its earnings.

Though Great Western's management accepted Washington Mutual's bid on March 6, analysts appear divided over Ahmanson's offer and Washington Mutual's.

"I don't share the view that this was a knockout blow to Ahmanson," said Tom Theurkauf, an analyst at Keefe, Bruyette & Woods Inc. "If you dig into the numbers a little bit, you'll see that the execution risk is much greater for Washington Mutual."

Jonathan Gray, an analyst at Sanford C. Bernstein & Co., questioned Washington Mutual's projected revenue, which would come primarily from net interest income, fees, and deposit income.

Joseph K. Morford, of Alex. Brown & Sons Inc., said Washington Mutual's management has proven it is adept at pulling off big deals and could likely handle this one as well.

R. Jay Tejera, of Dain Bosworth Inc., said a Washington Mutual deal would create less disruption because, among other reasons, fewer employees would be laid off. Washington Mutual has estimated $145 million in severance related costs, and Ahmanson has projected about $325 million.

In Friday's trading, Ahmanson's stock price was up $1.375, to $42.125, and Washington Mutual's was down 12.5 cents, to $52.875. Great Western's stock was up 62.50 cents, to $47.50.

Based on those prices, Washington Mutual's deal would be worth $47.59 for each Great Western share, while Ahmanson's is worth $44.23 per share.

As speculation mounted about Ahmanson's next move, one person familiar with the company's strategy insisted that a counteroffer was not imminent.

"That's not a real consideration at this point," the source said. "We need to see the real value of Washington Mutual's offer and make sure all the facts are understood before we go off and talk about something else."

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