Wash. Mutual Reiterates Its Interest in California

Amid speculation that he is preparing a bid for Great Western Financial Corp., the chairman of Washington Mutual Inc. reiterated his interest in expanding in California.

Kerry K. Killinger, speaking at a conference here Friday, said he saw "enormous opportunity" in California. He declined, however, to identify any institution he might be eyeing.

H.F. Ahmanson & Co., the nation's largest thrift holding company, announced a hostile bid for Great Western on Feb. 17. And Washington Mutual is considered a leading candidate to launch a bid of its own.

Seattle-based Washington Mutual, which last year acquired California's American Savings Bank, sees California as very important to its consumer banking strategy, Mr. Killinger said.

"We've long set our sights on becoming a leading lender" in California, he said at the Montgomery Securities conference.

His company is ahead of schedule in integrating American and is ready to do another deal, he said.

Though observers have speculated that Norwest Corp., NationsBank Corp., or First Bank System Inc. might also launch bids for Great Western, none has yet made a formal move. And Ahmanson continues to push its bid vigorously.

Just minutes after Mr. Killinger concluded a session with investors, Ahmanson senior executive vice president and chief financial officer Kevin M. Twomey told the conference he was confident his company's bid would succeed.

Asked what Ahmanson would do if it failed, Mr. Twomey said, "That's probably the biggest issue we have to face." But he added, "We wouldn't be launching this if we were not very comfortable about achieving it."

Mr. Twomey said he exchanged pleasantries with Mr. Killinger when they bumped into each other in the hallway but nothing more.

Concerning other potential bidders, Mr. Twomey reiterated his claim that Ahmanson has the most compelling offer and "if someone else comes in, we'll just have to see."

A combination of Ahmanson and Great Western would create a powerful consumer lending, business banking, and cash management operation, Mr. Twomey said. The combined company could realize a 90% branch consolidation in California and 70% branch reduction in Florida, he told investors.

Mr. Killinger, meanwhile, said an acquisition has to be "accretive to earnings" but stopped short of defining a threshold for accretion.

"Every transaction is looked at individually," he said. "Normally, we'd like to see accretion in the first 12 months."

But he added that sometimes deals have to be looked at for their benefit three to four years after an acquisition.

Mr. Killinger said he did not think accretion should be defined strictly as adding to cash earnings. He added that a strong case could be made for amortizing goodwill in a purchase acquisition if the deal were compelling for strategic reasons.

"Our view on acquisitions is this: It is a very important business for us," Mr. Killinger said. "If you have a platform (to do acquisitions), you can add a lot of shareholder value."

However, some investors said they would prefer a Great Western-Ahmanson deal to a successful bid by Washington Mutual.

"I trust (Washington Mutual's) management will make the economic decision that benefits shareholders the most within a 12-month outlook," said William Rubin, equity securities analyst and select fund manager at Fidelity Investments. "Nobody knows for sure what price could lead to dilution."

Fidelity owns 8% of Washington Mutual's stock, 3% of Great Western's, and 2.5% of Ahmanson's, Mr. Rubin said.

Mr. Rubin said he favors an Ahmanson-Great Western linkup. "It would be a fantastic fit," he said. "I could not imagine a better combination for geographic and branch overlap."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER