Shareholders opposed to a thrift merger are mobilizing to kill the deal at an upcoming shareholder meeting.

In a Nov. 7 letter to shareholders of Hinsdale Financial Corp., the investment firm TGF Investments LP blasted management's plan to combine with Liberty Bancorp, creating a $1.3 billion-asset institution.

"The merits of this proposal are extremely modest and are far outweighed by the deal's detriments," Thomas G. Fitzgerald, managing partner of the firm, wrote in the letter, which was liberally sprinkled with bold-faced words and exclamation points.

"There are strategic alternatives to enhance shareholder value that management should ... explore - and this deal is not one of them," he wrote.

TGF Investments represents 80,000 shares, or about 3% of Hinsdale's 2.7 million outstanding shares.

The furor shows the growing willingness of shareholders in small banks and thrifts to cry foul at management decisions they believe would crimp their returns.

Another investor, Charles Schwab, estimated that the deal is opposed by shareholders controlling as much as 40% of the company's stock. The letter might generate more opposition.

Mr. Schwab, general partner of Kensington Capital Management, acknowledged that the dissident shareholders face tough odds in persuading a majority to vote against the merger at the Nov. 26 meeting. But he said they have a better chance for success than in other proxy battles he has witnessed.

Meanwhile, Hinsdale Financial chief executive Kenne P. Bristol expressed confidence that management would prevail.

"I think the vote will be in favor of the merger," Mr. Bristol said. "I think most shareholders see the value of the merger moving forward."

Mr. Bristol said the merger of the two thrifts would create a stronger franchise, combining the western suburban turf of $650.9 million-asset Hinsdale and the suburban and urban territory covered by $664.1 million- asset Liberty.

Further, the combined institution would represent a more attractive takeout target than would either thrift on its own, Mr. Bristol said.

"The big guys would rather take a $5 billion asset institution than a number of $1 billion or $2 billion institutions," Mr. Bristol said.

But opponents of the deal maintain that Hinsdale's franchise is more valuable on its own. Furthermore, merging with Liberty would dilute Hinsdale shareholder returns on potential goodwill claims.

Hinsdale stands to gain up to $48 million from a supervisory goodwill lawsuit against the government - a windfall that would be shared with Liberty stockholders if the merger were approved.

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