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Golden West Pulls Its CalFed Merger Offer : Thrifts: The banking firms 'were never close on this one,' an analyst says. CalFed instead tries to shore up its finances.


Golden West Financial, parent company of World Savings in Oakland, said Monday that it is no longer interested in buying California Federal Bank--an announcement that investors had been expecting.

"The two parties were never close on this one, and it's no surprise that the thing has died," said Prudential Securities thrift analyst Thomas O'Donnell.

Golden West Chairman Herb Sandler declined to comment on the failed bid. In a prepared statement Monday, he said that "there seems little point in keeping our proposal outstanding" because Los Angeles-based CalFed was not interested in the offer.

After the offer was disclosed in January, shares in Golden West rose to about $44 in New York Stock Exchange trading. As its merger offer lost steam, Golden West shares dropped, closing Monday at $39.25, down 12.5 cents.

Golden West first proposed the idea of a union between the two banking companies in a letter to CalFed's board in December. Combining the two companies would have created the nation's second-largest thrift, with $44 billion in assets.

CalFed's management was cool to the idea from the start, refusing to hold talks or give Golden West permission to inspect its books. CalFed said the offer was vague and arbitrary.

Golden West had offered to pay the so-called tangible book value of CalFed's assets after problem loans were written down. Although CalFed's tangible book value was $616 million as of Sept. 30, Golden West's final bid probably would have been much lower after the expected write-offs.

"Herb Sandler has always searched for bargains, and CalFed shareholders were probably right to hold out for a fair price," O'Donnell said.

Golden West revised its offer to include so-called hope certificates. Those would have entitled CalFed shareholders to any money from the sale of problem assets that exceeded Golden West's estimates of what they were worth. CalFed rejected that offer as well.

To shore up its financial position, CalFed has embarked on a recapitalization plan that included the sale of its Florida branches and the sale of $1.1 billion in problem loans. CalFed is also seeking to raise more than $300 million through sales of stock purchase rights and preferred shares.

CalFed Chairman Edward Harshfield said his shareholders would receive a better price for the thrift by waiting for the recapitalization because bidders would pay more for a healthy institution.

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