Magazine article American Banker

Cal Fed Nixed Merger with Glenfed, Eyeing a Better Offer

Magazine article American Banker

Cal Fed Nixed Merger with Glenfed, Eyeing a Better Offer

Article excerpt

Two major California thrifts, Glendale Federal Bank and Cal Fed Bancorp, considered merging earlier this year before Cal Fed scotched the deal because it believes it could soon get a better offer from elsewhere.

Sources with direct knowledge of the situation said Glenfed initiated the talks because it believed the surviving institution - which would have had $29 billion of assets - would be more profitable, and more attractive to an out-of-state acquirer, than either company would be on its own. Many analysts and institutional investors agree that out-of-state banks interested in entering California would prefer to buy a company bigger than either Glenfed or Cal Fed in order to have enough market share to compete with BankAmerica Corp. and Wells Fargo & Co.

But Cal Fed was uncomfortable with some features of Glenfed's balance sheet, including its higher concentration of risky multifamily apartment and commercial loans, and its greater interest rate exposure.

Cal Fed and Glenfed spokespeople said their companies could not comment on the reports. But Cal Fed officials have said publicly that they have reviewed 31 acquisitions in the past year - both small branch acquisitions and larger mergers.

According to sources, Glenfed used the investment banking firm CS First Boston to bring the merger overture to Cal Fed.

As a sign of his serious intentions, Glenfed chairman Stephen J. Trafton offered to step down and let Cal Fed chief executive Edward G. Harshfield run the combined institution, according to sources.

Glenfed proposed that ownership of the combined company be split equally between the two thrifts' shareholders, sources said. The split, they said, would have been such that Glenfed shareholders would get new shares roughly equal to the value of their current holdings, while Cal Fed shareholders would have gotten a small premium. …

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