Ahmanson Dealt Crushing Blow in Thrift Fight

In a critical setback to H.F. Ahmanson’s hostile takeover bid for Great Western Financial, a Delaware court Tuesday cleared the way for Great Western shareholders to vote on a merger agreement with Washington Mutual at the end of next week.

Analysts said the court’s decision means Ahmanson, the parent of Home Savings of America, now has little choice but to sweeten its bid again to have a chance of acquiring Great Western.

“It could well be over,” said Joseph Morford, an analyst at Alex. Brown & Sons, alluding to the battle between Ahmanson and Washington Mutual to become the nation’s dominant thrift. “Today’s ruling was one of the last obstacles for Washington Mutual to win the bidding war.”

The ruling by Delaware Chancellor Jack Jacobs denied Ahmanson’s last-ditch request to delay a Great Western special shareholders meeting set for June 13, at which stockholders will vote on a friendly merger deal with Seattle-based Washington Mutual.

Ahmanson, based in Irwindale, sought to postpone the vote on the merger with Washington Mutual by at least six weeks so it could try to seat nominees on Great Western’s board during the annual meeting, in an effort to press its case.

But with Tuesday’s ruling, Great Western stockholders could very likely seal the merger with Washington Mutual next week without giving Ahmanson a chance to launch a boardroom fight. Great Western has repeatedly refused to meet with Ahmanson and had postponed the annual meeting from last April to June 13, the same day as the merger vote but later in the afternoon.

An Ahmanson spokeswoman declined to comment on the court’s action or what the company’s next step may be. Ahmanson could appeal the decision or consider raising its offer one last time.

But Ahmanson has already sweetened its stock-swap bid once, and analysts said the company’s shareholders are likely to frown on another increase because that would dilute earnings and weaken Home Savings’ capital.

“I don’t think Ahmanson should” increase its offer, said the manager of one large institutional shareholder of Ahmanson, Great Western and Washington Mutual. “It would give too much of the benefit to Great Western shareholders and not enough for Ahmanson.”

Ahmanson raised its offer in mid-March, a month after launching an unsolicited bid for its longtime rival in Chatsworth. At that time, Ahmanson’s sweetened offer of 1.2 shares for each Great Western share was worth $3 more per share than Washington Mutual’s offer of 0.9 share for each Great Western share. But in the last couple of weeks, the momentum has shifted.

Based on Tuesday’s closing prices, less than 8 cents a share separated the two offers. Ahmanson’s latest bid was worth $6.88 billion, or $48.30 per share to Great Western shareholders. The value of Washington Mutual’s offer stood at $6.89 billion, or $48.375 per share.

The Delaware court’s ruling was announced late in the afternoon just as the market was closing. Ahmanson’s stock dropped 50 cents Tuesday to close at $40.25 on the New York Stock Exchange; Washington Mutual’s fell $1.25 to $53.75 on Nasdaq. Great Western shares slipped 37.5 cents to $47.375 on the NYSE.

Spokesmen for Great Western and Washington Mutual applauded the court’s ruling, saying they await the shareholder vote and the completion of the merger.

Said David Berry, a financial services analyst at Keefe Bruyette Woods in New York: “Looks like Washington Mutual wins. I think investors will vote for it.”