On the evening of Feb. 17, John Maher stepped out of a corporate jet at Van Nuys Airport after a long President's Day weekend skiing in Colorado with his 13-year-old daughter.
Maher, chief executive of Great Western Financial Corp., was confronted with an urgent message from his general counsel, Lance Erikson: H.F. Ahmanson & Co. was preparing to launch a hostile takeover of Great Western the next morning.
Maher immediately called Ahmanson Chairman Charles Rinehart from an airport hangar to learn details of the offer.
"I said 'Gee, Charlie, it's the Monday evening of a three-day weekend. I've got my daughter here at the airport. We can meet on Tuesday.' But he made it very clear that what he had in mind was going to be put in play by then," Maher recalled.
Later that evening, as he called board members and company officials from home, Maher learned that Ahmanson had already leaked word of the attempted takeover to the press.
He never spoke with Rinehart again.
What followed was a three-and-a-half-month war between two of the nation's most powerful thrifts, with each firing off a steady barrage of press releases, full-page newspaper ads and lawsuits.
It ended this month with Ahmanson's admission of defeat and formal approval of the deal June 13 by Great Western and Washington Mutual shareholders.
With the battle behind them, Maher and other critical players gave a detailed account of how the deal transpired and why Ahmanson lost, and Washington Mutual won. (Ahmanson officials declined an offer to give their account).
It's a story of late-night conferences spent over pots of coffee and take-out Chinese food, investor road shows that stretched on for weeks, thousands of miles on cross-country flights and countless pages of legal and regulatory documents.
In the end, it was a numbers game, pure and simple, Maher said. Washington Mutual had superior returns on equity and assets. Washington Mutual's bid was deemed by Wall Street to be a bit higher than that of Ahmanson. And Washington Mutual had a jump on Ahmanson in making itself more bank-like, a transformation considered critical for any thrift to survive in the new age of deregulated banking.
"One of the things we looked at as an alternative was a combination with Ahmanson," Maher said in an interview from his penthouse office at Great Western headquarters in Chatsworth. "But as the facts unfolded and once we decided it did make sense to pursue strategic alternatives and we had interest from other parties it was the unanimous decision of our board that (Washington Mutual) was a superior company with a superior price. On that basis, we executed the agreement with Wamu."
Maher insisted that he bore no personal animosity toward Rinehart, and said he hadn't spoken to Rinehart simply because there was no need to he was fully aware of the details of the offer.
His dealings with leaders of rival thrifts were considerably more friendly.
On Feb. 25, Maher and his wife invited Washington Mutual Chief Executive Kerry Killinger to their Bel Air home for dinner. The Mahers had a similar dinner at their home with the chief executive of another thrift, which he would not identify.
Early on, Ahmanson also committed what now appears to have been a major tactical blunder when Rinehart issued an internal memo guaranteeing that no Ahmanson employees would be laid off as a result of the merger implying all job cuts would be from Great Western's ranks.
That made Ahmanson's bid appear all the more hostile and provided Great Western with ample ammunition for swaying the opinions of its employees and the public against Ahmanson.
In contrast, Maher said he was impressed with Washington Mutual's track record and Killinger's dynamic management style. Killinger came to Washington Mutual in 1982 and transformed the company from a conservative regional savings bank with 39 branches into what will be the nation's largest thrift, with $87.5 billion in assets. Part of that came from acquiring American Savings Bank last year.
There were other suitors, most notably Minneapolis-based Norwest Corp., headed by Richard Kovacevich.
In the days after Ahmanson's announced bid, Killinger and Kovacevich each headed up a team of attorneys, investment bankers and accountants who were in town to evaluate the feasibility of buying Great Western.
Those two teams of 75 people each occupied separate camps in the Great Western building, adjacent to the company's headquarters building, with each team doing due diligence over a three-day period in late February.
After days of number-crunching, the Washington Mutual team determined that the thrift could afford to pay nine-tenths of a share of Washington Mutual stock for each share of Great Western, a deal that initially penciled out at $6.6 billion.
Great Western and the two teams were "trying to be discreet," explained Phil Erlanger, head of investment banking in the L.A. office of Lehman Brothers and one of Washington Mutual's key players in the drama.
"They had people driving in and out (individually) in their own cars in an attempt to keep it very normal and uninteresting."
"Those days were filled with lots of non-stop meetings with pizza and too much fast food," said Maher.
"This was the biggest windfall for the owner of the local delicatessen Abe's Deli in the history of Chatsworth," Maher added. "The business he got was phenomenal. We had people from all over the country."
In the days that followed, Maher said it became apparent that Washington Mutual's proposal was the best deal for shareholders.
That determination led to a marathon session of negotiations between Washington Mutual and Great Western in the two days leading up to the definitive merger announcement on March 6.
Time was critical because officials wanted to hammer out an agreement for approval by the Great Western board, which was meeting in Chatsworth on March 4 and 5.
"Some issues were still going on as the board started to meet," said Fred White, a partner at Skadden Arps Slate Meagher & Flom LLP, which did most of Great Western's legal work.
The two final sticking points: The amount of a termination fee Great Western would receive if the deal collapsed, and Washington Mutual's desire to be granted Great Western stock options.
Those points were finally resolved the termination fee was set at $75 million and Washington Mutual relented to not getting the options.
The Great Western board voted unanimously with a show of hands to approve the deal after the last few issues were settled in the early evening hours of March 5.
But rather than celebrate, nearly all the key players spent the night of March 5 on two charter planes out of L.A. and Seattle headed to New York, where both sides planned a joint announcement of the deal the next morning.
"We were working on adrenaline at that point," Erlanger said.
The morning announcement kicked off one of the most intense periods for Erlanger, Killinger, Maher and Great Western's Chief Financial Officer Carl Geuther, who made up the heart of a road team. During one of the most intense periods, the team went to 22 different cities over a nine-day period.
All the while, the value of the two offers seesawed back and forth as Ahmanson's and Washington Mutual's stock prices fluctuated on Wall Street. Generally, Washington Mutual's deal lagged behind Ahmanson's in value, due to investor skepticism about many of the offer's aggressive estimates and projections.
But the tide began to turn on May 12, when Washington Mutual held an investor conference in Seattle to sell investors and analysts on its proposal.
Prior to that time, many investors still didn't believe that Killinger could produce the cost savings and generate the revenues he was promising. But Killinger can be persuasive in such forums.
However, there was still Ahmanson to deal with. The company had been filing a series of lawsuits in Delaware Chancery Court, starting with one accusing Great Western of improper consideration of Ahmanson's offer. The fourth and final suit, filed on May 13, was designed to postpone a special shareholders meeting which Great Western had slated for June 13 to vote on the Washington Mutual deal.
Great Western's annual shareholders meeting was to be held that same day, and Ahmanson hoped to get its slate of directors elected to Great Western's board before the vote was taken on the Washington Mutual deal.
The May 13 filing is when the battlefield shifted away from investor conference rooms and to the Delaware Chancery Court in Wilmington, where attorney Rod Ward headed a team of lawyers from Skadden Arps that had responded to all the Ahmanson legal actions thus far.
"We knew that this was the key from the litigation point of view, and (the argument we would make at this hearing) would be our key argument," said Ward.
In the week preceding a May 30 hearing, Skadden Arps' lawyers worked around the clock, sifting through more than 3,000 pages of memoranda, company by-laws, filings from the Securities and Exchange Commission, the Office of Thrift Supervision and other documents to research and compile their brief.
The hearing itself lasted less than three hours, with Judge Jack B. Jacobs promising to deliver an opinion before his son's graduation from Harvard on June 6.
Ward received the ruling in Great Western's favor on June 3. The next day, June 4, Ahmanson withdrew its bid rather than appeal the court decision.
That decision first reached Maher in Bel Air at 5:45 a.m. local time, when Lou Wolfe of Merrill Lynch called and woke him with the news.
Maher had reason to celebrate. The severance package he stands to receive as a result of the merger is worth $10.5 million, on top of stock and options he owns worth another $13.8 million.
Maher has yet to decide what he'll do after the merger, though he is expected to retire. He intends to spend his summers with his two children, who will go off to boarding school this fall.
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