Washington Mutual Inc. won another round in its battle to become the dominant player in the California thrift market.
Great Western Financial Corp. reiterated that it was committed to selling to Washington Mutual-and said flatly that it would not consider the rival offer from H.F. Ahmanson & Co.
It was Great Western's first official statement since Ahmanson sweetened its hostile bid last week, and it seemed to energize Washington Mutual's chief executive officer, Kerry Killinger.
"We have a bid that we're confident will be approved by shareholders," Mr. Killinger said in an interview with American Banker. "When we come together, this will be what we characterize as a 'capital-generating machine.' "
Mr. Killinger's rival, Charles Rinehart, presented a more subdued face, backing out of some appearances before the New York investment community to huddle with H.F. Ahmanson's management team in Los Angeles.
"We were hoping they would let the shareholders vote on both proposals," said Mr. Rinehart, the chief executive of H.F. Ahmanson. "It's not like this is a communist country where there's one choice on the ballot and it's called an election."
He said Ahmanson would pursue its lawsuit alleging that Washington Mutual cannot account for the merger as a pooling of interests. And he said his thrift would accelerate its solicitation of shareholder support for opening negotiations with Ahmanson.
People close to Ahmanson said the result of the vote could be known early next week, if not sooner.
"If Ahmanson doesn't prevail on the consent solicitation, they've got a real problem," said Keefe, Bruyette & Woods analyst Thomas F. Theurkauf. "Then they've got to hope that Great Western shareholders simply vote down Washington Mutual's proposal, and I don't think that's going to happen."
No date has been set yet to vote on Washington Mutual's bid.
Mr. Rinehart's abrupt departure from New York surprised analysts expecting to hear the thrift's pitch.
"This will come down to who did a better job of convincing the investment community of the reasonableness of their assumptions and their ability to achieve them," said Joel W. Silverstein, of Deutsche Morgan Grenfell. "So I thought this would've been a great time to build his case and tell his story."
Mr. Theurkauf said Mr. Rinehart told him Tuesday that he expected Great Western's board to reiterate its support for Washington Mutual.
Ahmanson delivered a letter to Great Western board members urging them to discuss Ahmanson's proposal. Mr. Rinehart said in an interview from his flight west that he thought Great Western refused to talk to Ahmanson because doing so "would have had a very positive impact on our stock price" and would have made the hostile offer harder for shareholders to reject.
In the letter, Mr. Rinehart suggested that Ahmanson and Great Western hire an outside investment banker to compare the competing offers.
Great Western refused. "The very nature of the Ahmanson proposal is marked by financial engineering that we believe would not serve our shareholders well," a Great Western spokesman said. "Our concern is that their plan would take an institution that already operates with a relatively thin level of capital to a dangerously low level."
Clearly emboldened by the news of Great Western's decision, Mr. Killinger spoke of a future so bright for his thrift that even the arrival of acquisitive-minded First Bank System Inc. to his northwest territory would be a blessing.
As First Bank absorbs Portland, Ore.-based U.S. Bancorp, Washington Mutual is bound to pick up disgruntled customers, Mr. Killinger predicted. In the meantime, he said his thrift will gain customers if it purchases Great Western, even though analysts say customer loss is unavoidable in virtually every merger.
Indeed, Washington Mutual's momentum will be so great after the merger, Mr. Killinger said, that the thrift won't need much loan growth to hit its controversial earnings projections.
Washington Mutual forecasts that the merger will add 8% to earnings in 1999. Mr. Killinger said that Washington Mutual can realize 10% annual asset growth from the merger and 15% capital growth mainly by increasing loan production and retaining loans.
"We expect loan demand in the northwest to outpace the nation," he said. And California, he said, is poised to "rebuild" after difficult economic times.
"Certainly a recession nationally would have an affect on (loan) origination volumes," he acknowledged. But he said he is "very comfortable" that his thrift will maintain production goals and hit earnings targets.