SAN DIEGO — Federal regulators have approved Wedbush Corp.'s request to increase its stock holdings in Great American First Savings Bank to 24.9% from 9.2%.
But the approval limits the Los Angeles financial services firm to only one seat on Great American's 14-member board and prohibits it from seeking to take over the San Diego savings and loan's management.
Wedbush also is prohibited from soliciting proxies in opposition to Great American management, and it must sever its business ties to the thrift by year-end, according to a Securities and Exchange Commission document filed on Tuesday. Wedbush clears trades for Great American's stock transactions.
The Wedbush filing gives it the right to buy up to one-fourth of Great American's nearly 23 million shares.
Already Spent $19 Million
Wedbush already has spent more than $19 million accumulating more than 2.1 million shares. If it wants to buy additional shares, Wedbush can draw from a $30-million line of credit with First Interstate Bank, according to the SEC filing.
But Wedbush officials on Thursday reiterated their longstanding insistence that their stock buys represent only an investment, not a takeover bid of Great American, which has $12.4 billion in assets.
The stock, Wedbush said in its SEC filing, is undervalued. Great American stock closed Thursday at $17.875. The company's book value is $22.77 per share.
"We are interested in increasing our investment in Great American if the economic conditions appear favorable in the future," according to Philip J. LoBue, Wedbush senior vice president.
Some S&L industry observers contend that Wedbush is positioning itself in the event that another firm makes an offer for Great American, although LoBue on Wednesday maintained that is "not our intention."
Great American Chairman and Chief Executive Gordon Luce said Wednesday that Wedbush's agreement shows it has a "high degree of confidence in our management" and that Wedbush is investing because "it believes Great American to be a strong, profitable company with a bright future."
Despite the glowing words, Great American has in the past taken actions to thwart Wedbush's stock buys.
In January, Great American asked regulators to block Wedbush's stock purchases because the San Diego company's bylaws prohibited any entity from acquiring more than 10% of Great American stock prior to Aug. 25, 1986.
And, in early summer, Great American management met with Wedbush officials and asked that Wedbush limit its voting rights.
Wedbush rejected the offer, according to the SEC filing.
Great American has proposed that Wedbush must only sell its shares in the open market, not to any individual, but Wedbush hasn't yet responded, according to the filing.
Wedbush's agreement with the Federal Home Loan Bank Board is part of a new regulation, effective last January, that speeds the stock accumulation approval process. In trade, the purchaser must consent to certain limitations, similar to the Wedbush agreement.