After nearly four months of legal maneuvering and caustic rhetoric, the epic battle for Great Western Financial Corp. ended Wednesday when H.F. Ahmanson & Co. withdrew its hostile offer.
Ahmanson's decision to walk away in the face of mounting setbacks left Seattle-based Washington Mutual Inc. holding the prize-a $42.9 billion- asset thrift with a coveted retail network in California and Florida.
There now appear to be no serious obstacles to the merger, which would create an $89 billion-asset retail powerhouse-the 11th-largest U.S. financial institution, and the largest thrift by far. Ahmanson, with $48.7 billion of assets, would rank a distant second. Great Western shareholders are expected to approve the deal at a June 13 meeting.
"Wamu is going to be a Goliath," said Todd Pitsinger, a thrift analyst with Friedman Billings Ramsey & Co., Arlington, Va. "Wamu will dictate the moves" in its market, which also takes in Washington, Oregon, and six other Western states.
Reached in Boston on Wednesday, Washington Mutual chairman Kerry K. Killinger said he was pleased with the outcome.
"It took time to explain our investment case, but as investors had a chance to understand our numbers better they became increasingly comfortable that they would provide powerful results," Mr. Killinger said.
Ahmanson, which launched the takeover battle Feb. 18 with an unsolicited bid for Great Western, threw in the towel after concluding that the only way to win would be to raise its bid for the second time-a move it determined was too costly.
"When we made the decision to do this, we thought it was so compelling that we can't be afraid to do it when it's in the best interests of shareholders," said Mary Trigg, an Ahmanson spokeswoman. "But likewise, we were not going to do it at all costs. You have to know when to get out."
"It would've been a Pyrrhic victory if we had raised the bid," added a source from the Ahmanson camp. "The costs of battle would have been too great."
Though it was clear Ahmanson had been losing momentum for weeks, the crucial blow came Tuesday when the Delaware Chancery Court denied its bid to delay the Wamu merger vote for six weeks until after Ahmanson had a chance to get three directors of its choosing elected to Great Western's board.
The Delaware judge denied the request, stating in part that the three directors, if elected, would have no impact on the proceedings. Ahmanson chose not to appeal the ruling because most of Great Western shareholders would have already voted by the time the appeal was heard, according to an Ahmanson source.
Ahmanson also failed to gain the decisive 5% price advantage over Wamu's offer that its chief executive officer, Charles R. Rinehart, acknowledged was needed to pull off a hostile deal. Mr. Rinehart was not available for comment.
Indeed, since May 16 the value of Washington Mutual's offer exceeded Ahmanson's, though Ahmanson had sweetened its deal in March. The difference between the two bids was usually less than $1 a share.
In Wednesday's trading, Washington Mutual's stock rose $1.0625 to $54.8125. Ahmanson's was up $1.25 to $41.50, and Great Western's was up $1.375 to $48.75.
"We felt from the outset that Wamu was the better company with a better deal, and the market has come to understand that," said John F. Maher, chief executive officer and chairman of Great Western.
The new Washington Mutual would boast market capital of $13 billion. It would rank third in the rebounding California market with 9.2% of deposits, behind BankAmerica Corp.'s 16.1% and Wells Fargo & Co.'s 10.9%, according to Washington Mutual.
The deal, valued at $6.8 billion based on Wednesday's prices, would also bring Washington Mutual into a new state, Florida, where it would have $7.1 billion of deposits, or a 4% market share.
Assimilating the operations, on top of its continuing integration of American Savings Bank, would be a major challenge for Washington Mutual, but analysts said Mr. Killinger has proven he is up to the job.
"It's very formidable, yes, but I don't think it's as difficult as people believe," said Mr. Pitsinger, the thrift analyst. "As long as they have the management, the systems, and the internal controls in place, which Kerry has been working so hard to set up, they can do it. They have done it before."
Analysts also speculated that Mr. Killinger will be looking for additional deals in California. Though the Great Western integration is expected to last until the second quarter of 1998, he may not wait that long to strike again, some said.
"People like Kerry are already sniffing around," said R. Jay Tejera, an analyst with Dain Bosworth Inc., Minneapolis. "I see them continuing to roll up the California S&L market."