Washington Mutual announced plans Tuesday to buy the owner of Home Savings of America for more than $10 billion, a stunning move that would result in the loss of up to 3,500 jobs and the closure of as many as 170 branch offices, most of them in the Southland.
Seattle-based Washington Mutual, already the biggest thrift in the nation because of a spree of recent acquisitions, said it would acquire Irwindale-based H.F. Ahmanson through an exchange of stock valued at $10.1 billion based on Tuesday's closing market prices. The merger would create California's second-largest financial institution and the nation's seventh-largest.
The purchase of Home Savings, itself the nation's biggest savings and loan for many years, would give Washington Mutual $150 billion in assets and 2,000 branches. It would enable Washington Mutual to supplant Wells Fargo & Co. as the main rival in the West to BankAmerica Corp.
"This is truly a unique and tremendous combination," said Washington Mutual Chairman and Chief Executive Kerry Killinger, who will lead the combined companies. "We can go toe to toe with the major consumer banks in California."
The combined entity would be the biggest mortgage lender on the West Coast and boost Washington Mutual's market share in California (based on deposits) to 17%, just behind BankAmerica's 20% share. The merged company would keep the Washington Mutual name.
Officials at both companies said it's too early to tell how many branches and jobs will be lost in Orange County as a result of the buyout. Home Savings has about 600 employees in the county at 28 branches and a consumer-lending operation in Lake Forest.
Washington Mutual has about 40 branches still bearing the names of prior acquisitions, Great Western Bank and Irvine-based American Savings Bank. Those will be renamed to Washington Mutual next month.
A company spokesman said Washington Mutual plans to keep its giant administrative center--American's old corporate headquarters in Irvine--after the acquisition of Ahmanson is completed.
The deal is one of the largest in a series of high-profile mergers in the financial services industry in recent years. Driven by the companies' push to increase efficiency through size and by record high prices in the stock market, bank and S & L mergers are proceeding faster than at any point in history.
In the last decade, Washington Mutual has bought 21 companies. Home Savings itself acquired Coast Savings Financial in October.
But while the deals have captured headlines, they have often left customers angry and confused.
Some Home Savings customers, for instance, called Downey Savings & Loan offices Tuesday to see about switching their accounts, said the Newport Beach thrift's chairman, Maurice L. McAlister.
"Here we go again," said Peter Navarro, a professor in the Graduate School of Management at UC Irvine on Tuesday. "People in Los Angeles and elsewhere are not happy about musical banks. Bigger in banking does not mean anything better for the consumer."
Alan Fisher, executive director of a nonprofit community investment group known as the California Reinvestment Committee, called the deal "a stunning next step in banking consolidation in this state."
"There's a concern about what this means in Los Angeles, where you have job losses and branch closures," Fisher said. "There could also be fewer lending opportunities for consumers."
But Wall Street cheered the deal.
Washington Mutual and Ahmanson are "an ideal fit" because of the possibility for massive cost-cutting through layoffs and branch closures, said Jonathan Gray, an analyst at the investment firm Sanford C. Bernstein & Co. in New York. Washington Mutual is expected to eventually slash its annual costs by $330 million.
More than 60% of Ahmanson's bank branches are within a walk or short ride from a Great Western branch, Gray noted. Most of the closures are expected to occur in Southern California, where there is the greatest overlap of branches, analysts said.
Most of the projected 3,300 to 3,500 job cuts, some expected to occur through attrition, will occur here as well, they said. Washington Mutual said it would try to reassign some employees, and workers who are laid off would be given severance packages. The packages would vary depending on an employee's position and experience, Killinger said.
Although the deal to buy Ahmanson comes before Washington Mutual has even completed absorbing Great Western, analysts predicted that Washington Mutual would not suffer the computer snafus and other well-publicized problems that Wells Fargo had after its 1996 acquisition of First Interstate Bank.
"They are expert consolidators," said Donald Destino, analyst at the securities firm Jefferies & Co. in Los Angeles. "Generally, these have come off without a hitch."