As the fight for Great Western Financial Corp. stretches into its fourth month, the players are beginning to show signs of battle fatigue.
By the time Great Western shareholders meet June 13 to consider the $6.6 billion friendly bid by Washington Mutual Inc., the ordeal will be in its 115th day. That would be 16 days longer than it took for Wells Fargo & Co. to win over First Interstate Bancorp last year.
"I think everybody is pretty tired and would like to be done with this," said an adviser to H.F. Ahmanson & Co., which fired the first shot Feb. 18 with a hostile bid, now also worth $6.6 billion. "Everyone wants to move on."
Still, all involved can console themselves on one count: This standoff is still short of the 13-month record set by Bank of New York Co. in its 1987 hostile bid for Irving Bank Corp.
It remains far from clear whether $43 billion-asset Great Western, based in Chatsworth, Calif., will go to Washington Mutual, Seattle, or to Ahmanson, Irwindale, Calif. Increasingly, however, Washington Mutual is seen as having the edge. That's because, in the absence of a clear price advantage for either offer, the friendly nature of Washington Mutual's bid is seen as more palatable to investors.
But the duration of the fight raises questions about what exactly the winner will get. This long takeover battle has had severe repercussions for the target, Great Western, and may have depleted some of its value.
Stunned by the unsolicited offer from Ahmanson, Great Western has had to work overtime to calm fears of employees and customers about what the future holds.
"It's hard on human beings the longer its lasts," said Lillian R. Gorman, who was the head of human resources at First Interstate and dealt firsthand with takeover anxiety.
"You first need a severance package to quiet the employees down, and then you start telling them the truth as you know it and about what either of the two combinations will look like in the short term," she said.
Most Great Western employees aren't expected to jump ship until their severance packages go into effect, four or five months from now. But in an interview in April, Ahmanson's chief executive officer, Charles R. Rinehart, said his company's biggest source of job applicants in recent months has been Great Western.
"You begin to worry about the value of Great Western as this drags on," Mr. Rinehart said. "It's the middle managers, what I call the sergeants, that are the most valuable to a company, and we're seeing a lot of evidence of them leaving."
He would not specify how many Great Western employees have applied for jobs at Ahmanson.
Stephen Trafton, chief executive officer of nearby Glendale Federal Bank, also said recently that his thrift is benefiting from an influx of Great Western employees and customers.
However, the biggest problem for a company embroiled in a messy takeover is new business generation, particularly on the corporate side, according to a veteran of the Bank of New York/Irving Bank Corp. deal. "People don't want to make decisions until they know who they're going to be dealing with," the person said.
Great Western stressed it has suffered no customer runoff. It cited its booking of $1 billion of new mortgage loans in April, a 90% improvement from last April and its best single production month since August 1990.
History shows that the longer a hostile takeover lasts, the greater the chances that a regulatory or legal matter could tip the scales.
In the Bank of New York deal, the court invalidated Irving's takeover defenses, paving the way for Bank of New York's victory. In Wells' successful fight last year against First Bank System Inc., the Securities and Exchange Commission ruled against First Bank's stock buybacks in light of its proposed accounting method.
The SEC has already signed off on friendly bidder Washington Mutual Inc.'s accounting method, but the Delaware Chancery Court will be hearing arguments on May 30 that Great Western's board has violated its fiduciary duties in the scheduling of its annual meeting.
Observers said they believe the matter will come down to the shareholder vote, scheduled for June 13, a date probably much later than Mr. Rinehart anticipated back in mid-February.
"I don't think Charlie expected this at all," said Charlotte Chamberlain, an analyst with Jefferies & Co. in Los Angeles. "I think he was expecting the Wells script and a raucous round of applause from the Street. I don't think anybody expected this total standoff."
Despite ennui on all sides, at least the balance sheets of the two bidders have remained largely untarnished.
Washington Mutual last week held a well-attended investors conference at a Seattle hotel, where its chief executive, Kerry K. Killinger, told the crowd that he was "comfortable" with the upper end of earnings estimates for 1998.
The statement prompted most analysts to revise their estimates for Wamu significantly upward.
For its part, Ahmanson stated earlier in the month that its asset quality continues to improve, with nonperformers falling by $41 million to $752 million in April.