Royal Trustco, a Toronto-based financial services company with ties to one branch of the wealthy Bronfman clan, has acquired an 8.6% interest in the parent firm of Glendale Federal Savings & Loan for $54.7 million and indicated that it may eventually seek control of the thrift company, it was disclosed Friday.
According to a filing with the Securities and Exchange Commission, Royal Trustco has accumulated 2.48 million shares of stock in Glenfed Inc., the parent company, since late September. The purchases, at an average price of $22.09 a share, were made through an investment subsidiary.
The investment in Glenfed is part of an "overall review of the United States financial services industry," the Canadian company said, "including the thrift industry in general. . . . Royal Trustco wishes to meet with Glenfed's management from time to time as part of its continuing review."
Financial analysts said Royal Trustco's move may be the first sign of increasing investor interest in California's publicly traded savings and loan firms, whose stock values were depressed even before the Oct. 19 stock market crash.
Came as Surprise
"Somebody noticed that California thrifts are really selling at bargain prices--if one takes the long-term view," said Peter Treadway, analyst for the investment firm of Smith Barney, Harris Upham.
Jerome Baron, analyst for Prudential-Bache Securities in New York, estimated that Glenfed is worth at least $40 a share--or more than $1.1 billion. The company's stock closed Friday at $25.625, up $1.25.
Royal Trustco's move was met with near silence at Glenfed's high-rise headquarters in Glendale. "This is a bolt out of the blue for them," said Baron, who had met with Glenfed executives earlier in the week.
A brief statement from Glenfed noted that Royal Trustco's filing "does not indicate the intention to seek control," adding, "Management had no further comment."
The SEC filing, though, noted that the Canadian firm "may determine to . . . seek control of Glenfed" through a variety of ways, including a tender offer or merger, or it may "dispose of some or all of the shares."
Future purchases would depend on a variety of economic factors, Royal Trustco said, as well as the attitude of Glenfed's management.
A union of Royal Trustco and Glenfed would combine a fast-growing Canadian financial services company with a solid, if stodgy, California financial institution that has been fighting for Wall Street's recognition and respect for years.
Royal Trustco is a profitable, medium-sized firm whose $16.5 billion in assets include interests in banking, mortgage lending and real estate. It is an aggressive firm and has been growing at a 20% annual clip in recent years, said Jeff Carney, a financial analyst for Merrill Lynch in Toronto.
"There's not a lot of room left to grow in Canada, so they have to go elsewhere now," Carney said.
Peter and Edward Bronfman, who operate out of Toronto, have an indirect, but influential, interest in Royal Trustco through a privately held firm known as Edper Enterprises. But a spokesman for Royal Trustco played down the Bronfman connection.
"Don't make too much of that," the spokesman said. "Royal Trustco is independently run. The Bronfmans only have a very small indirect interest." The Bronfmans could not be reached for comment. (Their cousins, Charles and Edgar Bronfman, run Montreal-based Seagram Co.)
Peter and Edward Bronfman reportedly control some two dozen publicly traded companies through Edper Enterprises. They are known as demanding bosses who nevertheless pay underlings well and give them freedom to do their business.
One Canadian financial analyst, who asked that his name not be used, said it was probably Royal Trustco's idea to acquire Glenfed's stock. "I would guess they got the Bronfman's OK and then went ahead," he said.
Glenfed has $22.4 billion in assets and 215 branch offices in California and Florida. But it is a a firm that, in investment circles anyway, has been overshadowed by its behemoth competitors in the Los Angeles area.
"They don't have the flashy image," analyst Baron said, but he noted that Glendale Federal Savings is well capitalized and has an excellent branch system. "It's a very nice, steady-Eddie type of company," he added.
Must Be Approved
Though foreign ownership of U.S. savings and loans is not common, foreign interest in buying into these financial institutions has picked up in recent weeks as the dollar has fallen in value, according to M. Danny Wall, chairman of the Federal Home Loan Bank Board.
"There's a lot" of investor interest from both Europe and Asia, Wall said at a news conference earlier this week in New Orleans, where he had given a speech to an S&L industry trade group.
It is the Federal Home Loan Bank Board that would have to approve any union between Royal Trustco and Glenfed. Although hostile takeover attempts are also unusual in the savings and loan industry, they are not unheard of.
"It's possible to have an unfriendly tender offer under the present regulations," analyst Baron said, noting that regulators rule on a proposed purchase offer on the merits of the deal, not on whether the proposed purchase is friendly or not. Officials at the Bank Board could not be reached for comment Friday.
GLENFED INC. AT A GLANCE
Glenfed Inc. is the holding company for Glendale Federal Savings & Loan, one of the nation's five largest thrifts, with 215 branches in California and Florida. The company also has operations in mortgage banking, real estate, insurance and other financial services.
Quarter ended Year ended Sept. 30, 1987 June 30, 1987 Net income $45.4 $169.8 (millions)
Assets: $22.4 billion
Shares outstanding: 28.85 million
52-week price range: $16.875 - $33.50
Friday close (NYSE): $25.625, up $1.25