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Mercury Savings Hires Investment Firm to Handle Inquiries About Possible Sale

December 02, 1987|JAMES S. GRANELLI | Times Staff Writer

Directors of Mercury Savings & Loan, the object of potential suitors in recent months, said Tuesday that they have hired a San Francisco investment banking firm to handle inquiries about the possible sale of part or all of the Huntington Beach institution.

Montgomery Securities will also review the S&L's business plans, develop strategies to raise capital and advise the S&L on a variety of business and regulatory matters, including the possible purchase of smaller savings institutions, directors said.

Mercury Chairman Leonard Shane said, however, that the S&L is not engaged in any negotiations to sell. He said he and other officers and directors are considering the purchase of more company stock themselves. The Shane family already is the largest shareholder with 15% of the stock.

$2.2-Million Loss

Tuesday's announcement followed the S&L's November disclosures that it had lost $2.2 million in its third quarter and that President William Shane, son of Leonard Shane, would be resigning in the "near future."

Additionally, Mercury's stock--which has traded for as high as $13.625 a share in the past year--has been battered along with that of most other companies in the past month and hit a 12-month low of $4.50 a share during trading Tuesday on the New York Stock Exchange before closing at $4.625 a share.

The falling stock prices help make the S&L attractive to potential suitors, and while the Shanes downplay the possibility of a sale, the act of hiring an investment banker "says they're for sale if they can find somebody who could pay them enough money," said Gerry Findley, a Brea-based industry consultant.

"You don't hire a firm like Montgomery Securities and pay a nice fat fee unless you're interested in what they come up with," he said.

Downplayed the Action

And Jeffrey Kilpatrick, president of Newport Securities, a Costa Mesa firm specializing in Orange County companies, said the move tells those interested that Mercury is serious about "looking at or entertaining any prospective bids out there."

Mercury officials, however, downplayed the action.

"People are going to draw conclusions," said William A. Shane about the hiring of Montgomery Securities.

To say the investment banking firm was hired because the company is for sale "would be an improper conclusion," he said.

Shane, who announced last week that he was leaving the S&L in the next few months, said Mercury has received several inquiries--"tire-kickers"--in the past few months about a sale of all or part of the 23 1/2-year-old S&L.

The discussions were only preliminary, he said, but were taking up too much of top management's time.

'Something Out of the Norm'

"In times such as we have now, you have uncertainty," Shane said. "When you have uncertainty, you have people exploring. These inquiries are definitely something out of the norm for us."

One reason Montgomery Securities was hired, he said, was to free directors and officers for work.

"That's really all there is" to the action, he maintained.

Mercury is the state's 26th largest S&L and Orange County's sixth largest with $2.3 billion in assets. It has 26 retail branches throughout Southern California.

Leonard Shane, who helped start the S&L, is one of the better-known and more influential industry leaders nationwide and has said a number of times previously that he has no intention of getting out of the business. He has said he will assume the title of president when his son leaves.

Well-Run Operation

Findley said Mercury is a well-run operation, despite its third-quarter loss and a substantial dip in net income for the first nine months of 1987--to $3.1 million from $9.3 million in the same period last year.

Still, Findley said, "Len's done a good job. Mercury is still a good vehicle. Their market situation is very good. . . . They would probably fetch a pretty good price for their stock."

Mercury's stock has taken a beating in recent months and now trades at less than half its June 30 stated book value of $10.25 a share.

"The stock hasn't been this cheap since 1983," said analyst Kilpatrick. "Mercury's five-year growth is up 244%, and they've added $100 million in revenues in the last few years. Yet the stock is trading at just about what it was five years ago."

He speculated that the S&L may be running the risk of being the target of an unfriendly takeover--a rare event in the good-old-boys S&L industry.

"Rather than be stuck with an unfriendly suitor, they may be looking for one they like," he said.

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