Mario Antoci, chairman of American Savings Bank, felt it like a punch in the gut when investor Robert Bass broke the news to him that Washington Mutual wanted to buy American.
"It was kind of a shock to us. It kind of gets you in the stomach at first (and) takes the wind out of your sails," recalled Mr. Antoci, 62, in a lengthy interview Wednesday.
The news came after a routine board meeting at American's Irvine, Calif., headquarters late last January. Mr. Bass, trim and youthful-looking at 48, and another key investor, David Bonderman, 53, asked to speak privately with Mr. Antoci. They met in the chief executive's office, decorated with sketches of his boat and overlooking a runway at John Wayne Airport. American Savings' president, Robert Barnum, 50, also was there.
Mr. Bass told the duo that he and Mr. Bonderman, as well as two other key players - Washington lawyer Bernard Carl, 48, and J.T. Crandall, 42, the No. 2 man at Mr. Bass' Keystone Inc. - had visited Washington Mutual chairman Kerry Killinger in Seattle the week before. The meeting, arranged at Mr. Killinger's invitation, had impressed the group, Mr. Bass told Mr. Antoci.
Though American had been shopped for at least three years, Mr. Antoci was taken by surprise. "We were thinking out-of-state banks, or our own acquisitions," he said.
"The following week, Bob (Barnum) and I went up and met with Kerry Killinger in his offices," Mr. Antoci said. They, too, liked what they saw, and the bargaining began in earnest.
The negotiations lasted several months, and Mr. Antoci's behind-the- scenes account of them confirms the reputations of Mr. Bass and Mr. Bonderman as tough dealmakers, who are undaunted by complex transactions. The federal government's stake in American - a legacy of the 1988 deal through which Mr. Bass acquired the failed thrift - made the negotiations with Washington Mutual particularly thorny, several participants said.
The key negotiator for American was Mr. Bonderman. From 1983 to 1992, he had been chief operating officer of the Bass investor group. He now runs his own leveraged buyout firm, Texas Pacific Group, which led a $450 million recapitalization of Continental Airlines in 1993. Mr. Bonderman divides his time between Washington and Fort Worth.
One acquaintance described the Harvard Law School graduate as "brilliant." Mr. Antoci said Mr. Bonderman can "get to the bottom line quicker than anyone I know" in negotiating a deal.
Also bargaining for American Savings were Mr. Carl, principal in the District of Columbia-based Castine Partners, who has done stints at the Washington law firm of Williams & Connolly and at Salomon Brothers Inc., the New York investment bank. Mr. Crandall, who worked at Bank of Boston in the early 1980s, was also a player.
By the accounts of Mr. Antoci and Mr. Killinger, a crucial element in the deal was convincing the Bass partnership that Washington Mutual's stock had strong long-term prospects.
"I think that was as important as the pure negotiation for price because they were ultimately exchanging their stockholdings for our stock," Mr. Killinger said in a separate interview Wednesday.
The price negotiations themselves were "very intense for quite some time," Mr. Killinger said. Still, Mr. Antoci said, the Bass group realized it had to be "realistic" in its demands.
Mr. Killinger has frequently promised his shareholders that any acquisition he made would add to earnings right away. That limited how many shares the Bass group could expect to get, Mr. Antoci said, and ultimately Mr. Bass and his fellow investors accepted the idea of long-term appreciation of Washington Mutual shares. Monday, Washington Mutual's stock price jumped 16%, to $35 a share.
Mr. Antoci said the number of shares to be given to the Bass group was settled at a time when Washington Mutual's stock was trading at $31.50. That was in early July.
Both Mr. Antoci and Mr. Killinger said the Federal Deposit Insurance Corp.'s 30% stake in American lengthened the negotiations considerably.
Mr. Antoci said Washington Mutual was averse at first to the government's plan to sell its 14 million shares immediately after the deal closed but then realized there was no way out because the FDIC was not permitted to hold the shares. Then it became unclear whether sale of these shares would endanger the pooling-of-interests accounting that Washington Mutual wished to use for the deal.
Despite his initial reaction to the deal, Mr. Antoci is now an enthusiastic backer. For him, the deal means retiring two years sooner than he had expected, but that gives him two extra years to do what he loves best - putter around on his yacht and scuba dive.
Late this year, Mr. Antoci and his wife, Diane, will take possession of a new vessel from a Seattle shipbuilder. First stop, the Caribbean.