After weeks of frustration, H.F. Ahmanson & Co. may finally get its chance to put its bid for Great Western Financial Corp. before shareholders.
A prominent shareholder advisory group late Wednesday threw its support behind Ahmanson's campaign to look at Great Western's books and to have its unsolicited offer for the company considered alongside that of friendly bidder Washington Mutual Inc.
The endorsement by Institutional Shareholder Services-one of a small group of companies that research proxy issues for investors-is essentially a call for open debate, not a sanction of Ahmanson's proposed acquisition. Nevertheless, observers saw it as a breakthrough for the Irwindale, Calif., thrift.
"It's definitely a positive for Ahmanson," said Thomas Theurkauf, an analyst with Keefe, Bruyette & Woods.
In its report, the shareholder advisory group endorsed Ahmanson's campaign to prod Great Western into negotiating, something the Chatsworth, Calif., thrift has refused to do since it received the hostile bid on Feb. 18.
"Shareholders ought to have the company evaluate all the offers, rather than some and not others," said Peter Gleason, an ISS analyst. "They have looked at Ahmanson's offer, but not to the extent of the others that they invited in to look at their books."
Investors interviewed said the report likely would have some impact on the process.
"It makes sense to have the board consider both offers," said James K. Schmidt, portfolio manager at John Hancock Funds Inc., which owns 980,000 shares of Great Western's stock. "It seems like the fair thing to do."
Ahmanson is in the final week of a "consent solicitation," which asks Great Western shareholders to vote in favor of its efforts to look at Great Western's books and to hold an annual meeting on April 22.
Mr. Schmidt said he has not yet voted on the consent solicitation, which is expected to be completed within the next few days, but, he said he would be likely to support the proposal.
A handful of other shareholders, who requested anonymity, said that they too would likely support Ahmanson's proposals, mainly because extending the process could ultimately lead to additional bidding and a higher takeover price.
"Of course investors want an open process," said an investment banker not connected with the takeover battle. "What harm is there in that? It might force Washington Mutual to pay more."
At the close of trading Thursday, Ahmanson's bid was worth $43.80 a share, while Washington Mutual's was worth $43.59. Great Western's shares rose 37.5 cents to $41 Thursday, while Ahmanson's were up 12.5 cents to $36.50, and Washington Mutual's were up $1.1875 to $48.4375.
The Great Western camp tried to downplay the ISS report in a statement Wednesday. However, sources said all three parties involved in the merger battle sent contingents of top executives and financial advisers to the group's Bethesda, Md., headquarters, seeking its endorsement.
A person close to the Great Western camp compared the thrift's meeting with ISS to an audience with a bishop: "It's like getting on your knees and kissing the ring," he said.
Ahmanson said in a prepared statement that the report confirmed what it had been saying all along-that Great Western should negotiate.
If Ahmanson succeeds in its consent solicitation, it would also win the right to put three directors up for election to Great Western's board before any vote is taken on Washington Mutual's friendly merger offer.
A vote on Washington Mutual's offer is likely to take place at a special meeting in late May or early June, observers said.
Washington Mutual and Great Western want that meeting to occur before the annual meeting. Great Western has postponed the annual meeting indefinitely but would likely reschedule it after the special meeting is held, so that the Washington Mutual deal would already have been approved.
ISS took exception to this maneuvering. "By indefinitely postponing its annual meeting, the (Great Western) board is manipulating the process of annual elections to push the progress of its merger with Wamu, regardless of any other offer," Mr. Gleason wrote.
Mr. Gleason said he received a wave of criticism from the financial advisers of Washington Mutual and Great Western, who said he was questioning whether Great Western's board is exercising its fiduciary duties.
"Their argument is that we are second-guessing their board, which is not true," Mr. Gleason said. "But at a certain point you can't keep locking someone out to be fair to shareholders. You have to consider everything that is out there."