Citadel Holding's hostile bid to acquire Valley Federal Savings & Loan has been effectively rejected by the federal government, a Valley Federal lawyer said Monday. But Citadel's chairman said the application is merely delayed by a technical snag and that Citadel is pressing ahead with its bid.
Citadel, the Glendale-based parent of Fidelity Federal Savings & Loan, acquired options and commitments last November to acquire 39.2% of Valley Federal's 5.8 million common shares outstanding for $20.50 a share or $46.6 million.
The holding company then applied to the Federal Home Loan Bank Board for permission to buy that stock and the rest of Valley Federal, which is based in Van Nuys. The bank board is the federal agency that regulates thrifts, and its approval is required for control of an S&L to change hands.
Valley Federal has been fighting the takeover threat and last week announced that it was holding merger talks with another California thrift that it did not name. But industry sources have identified the other suitor as Home Federal Savings & Loan, a San Diego-based institution with $14 billion in assets and 168 offices. Valley Federal has $3.1 billion in assets and 47 branches, whereas Citadel's Fidelity Federal has $3.8 billion in assets and 30 branches.
Andrea Plater, a spokeswoman for the FHLBB in Washington, confirmed Monday that Citadel's application to buy Valley Federal "was returned to Citadel" in late-December. But she declined to say whether that meant that the bid was formally rejected or to otherwise elaborate on the agency's action.
However, David Fleming, a director and outside counsel of Valley Federal, said, "In my opinion, it's a rejection of the application, as opposed to the bank board simply deeming the application incomplete and asking for more information. It means Citadel has no application before the FHLBB; therefore, there's nothing for Valley Federal to respond to."
But Citadel Chairman James A. Taylor said the FHLBB had, in effect, found Citadel's application to be merely incomplete. He said Citadel, in asking both to buy the stock for which it has options and to then merge with Valley Federal, was supposed first to have a merger agreement to submit to the FHLBB. But a merger agreement at this point is impossible, he noted, because Valley Federal is opposed to Citadel's advances.
"The bank board advised us they wouldn't process that application absent a definitive merger agreement and certain other documents you can get only after you've negotiated a transaction," Taylor said. "They made no comment about the substantive aspects or the merits of the transaction."
As a result, Citadel this week will send in a new application asking only for permission to buy the 39.2% of Valley Federal's stock for which it has options, Taylor said.