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Simon's Group Plans to Acquire Western Federal : $150-Million Deal Would Add Healthy S&L to Ex-Treasury Secretary's Fast-Growing Empire

August 25, 1987|TOM FURLONG | Times Staff Writer

Investors led by former Treasury Secretary William E. Simon announced their intention Monday to acquire Western Federal Savings & Loan in Marina del Rey for about $150 million, a deal that would add another piece to Simon's swelling empire in financial services and real estate.

The Simon investors have agreed to pay Western Federal stockholders $41 a share for their stock, about double its recent market value. Following the announcement, Western Federal's stock soared $13.625 a share to close Monday at $37.25. The $150 million will be the most that Simon's group has spent on any of its recent acquisitions.

"There are a lot of happy (Western Federal) stockholders this morning," said Preston Martin, one of the investors. Martin, a former vice chairman of the Federal Reserve Board, oversees the group's investments in the savings and loan business. Western Federal's board has unanimously recommended stockholder approval of the offer.

"It's a good deal for both" sides, said Donald Crowley, a San Francisco-based analyst for the New York investment firm of Keefe, Bruyette & Woods. The shareholders are getting a good price for their stock, Crowley noted, and Simon is getting a "clean, well-run company."

Building a 'Mosaic'

Since last summer, Simon has led a group of investors who have acquired savings and loan firms in California and Hawaii, a commercial bank in Beverly Hills and a home-building firm in Orange County. Simon has also formed an investment partnership for Australian investors to buy into U.S. real estate and financial services companies.

The activity is part of Simon's goal to--as he put it in an interview with The Times last year--build a "mosaic of financial institutions" in the Sun Belt to capitalize on the growth in financial services and Far East trade.

If approved by regulators and shareholders, the acquisition of Western Federal would mark the first time the Simon group has bought a healthy financial institution.

Other acquisitions in the past year have included Honolulu Federal Savings and Southern California Savings, both of which had exhausted their net worth before Simon and his investors agreed to inject new capital into them.

On the other hand, Western Federal is a healthy savings and loan that has $2.1 billion in assets and 23 branch offices throughout Los Angeles and Orange counties. It earned $15.5 million in the fiscal year that ended June 30, more than twice the $6.6 million it earned in the previous fiscal year.

Dissident Sold Stake

It is a conservative institution that has stuck largely to mortgage lending and has experimented little with the construction loans that have gotten so many competitors into financial trouble. Western Federal has also developed a profitable mortgage banking operation whereby it makes home loans to customers, then sells the loans into the secondary market.

Its normally low-profile operations were thrown into turmoil in 1984, when dissident shareholder Jona Goldrich, a Los Angeles-area real estate developer, sought a seat on the board because he was unhappy with the company's stock value. Goldrich eventually sold his 9.9% stake for $7.66 million, or $21.60 a share, after a hard-fought struggle that lasted about 18 months.

The Simon group, through a newly formed company known as D. P. Holdings, plans to acquire an immediate 5% stake in Western Federal for $4.2 million. The investors also have an option to buy another 4.9% interest for $4.1 million should a competing offer arise.

The new investors, who plan to put an additional $25 million of new capital into the financial institution, want to use Western Federal as a "vehicle" to acquire other ailing savings and loans, according to Simon and fellow investor Gerald Parsky, a Los Angeles lawyer. Simon also said his investment group is negotiating two other banking acquisitions that should take only a matter of "weeks" to complete. He declined to elaborate.

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