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Ahmanson's Pleas Fail to Inspire Investors


A day after taking its case to Wall Street, H.F. Ahmanson & Co. on Tuesday garnered support from a number of analysts for its unsolicited proposal to take over Great Western Financial Corp. But investors yawned at the analysts' opinions, adding pressure on Ahmanson to raise its offer to counter a higher, rival bid by Washington Mutual Inc.

"In our view, H.F. Ahmanson made a strong case," said Furman Selz analyst Leslie Nelkin in his report Tuesday. Analysts at Smith Barney wrote that Ahmanson did a "first-rate job" in outlining why Washington Mutual's merger-related projections for cost savings and revenue growth are too optimistic.

Yet investors were not convinced. Washington Mutual shares edged up 12.5 cents to $54.50 on Nasdaq, while Ahmanson shares fell 62.5 cents to $41.75 on the New York Stock Exchange. Great Western, meanwhile, gained 62.5 cents to $48.625 on the NYSE.

Based on those prices, Washington Mutual's offer works out to $49.05 a share, or $6.98 billion. The proposal by Ahmanson, the parent of Home Savings of American, is now worth $43.84 a share, or $6.24 billion.

Mary Trigg, a spokeswoman at Ahmanson, said Tuesday she remained hopeful that investors would narrow the value of the two offers.

"We feel like we need to give it a little more time," she said.

Washington Mutual executives Tuesday were still preparing to file their merger plans with the Securities and Exchange Commission. That document, expected to be available today, should answer important questions about how Washington Mutual arrived at its merger-related projections. If those figures have a solid basis, analysts say, Ahmanson will feel more pressure to increase its bid.

Jonathan Gray, an analyst at Sanford C. Bernstein in New York, said he continues to believe Ahmanson has an advantage over Washington Mutual when it comes to cost savings because of the greater overlap between Ahmanson and Great Western operations. But given the market reaction, Gray said he expects Ahmanson to raise its stock-swap offer soon to 1.15 shares, from its original proposal to give Great Western stockholders 1.05 shares of Ahmanson stock for each Great Western share. Other analysts think Ahmanson could reach deeper and offer as much as 1.3 shares.

Lloyd Greif, an investment banker in Los Angeles who has been closely following the battle to acquire Great Western, viewed the investor reaction Tuesday this way: "I think they're looking at Kerry Killinger [Washington Mutual's chairman] and saying this guy is a seasoned veteran and more likely to consummate this deal."

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