The battle to acquire Great Western Financial Corp. is finally coming down to the shareholders.
The really big shareholders.
With the smallest of factors now taking on heightened significance, cross ownership of shares by institutional investors in two or more of the three institutions involved in the takeover battle could ultimately tip the balance in favor of the final winner.
Specifically, H.F. Ahmanson & Co. could benefit from the fact that many of Great Western's major shareholders are also major holders of Ahmanson stock.
Conversely, a smaller portion of Great Western shares are held by shareholders of rival suitor Washington Mutual Inc.
"For the shorter-term investor, the situation (where Great Western and Ahmanson have a number of major investors in common) could have a meaningful impact," said Todd Pitsinger, an analyst at Friedman Billings Ramsey & Co. Inc.
He explained that a one- or two-point rise in Ahmanson stock that would likely follow if Ahmanson were to win the bidding war could be a determining factor for undecided Great Western investors with large Ahmanson holdings.
Likewise, those same shareholders could be hurt in the short term if Ahmanson loses the battle, which would likely cause Ahmanson's stock to drop, he added.
Such expectations could well nudge Great Western shareholders who also own a major Ahmanson stake to choose in favor of the Ahmanson deal when a vote comes up on the matter.
Bill Rubin, a portfolio manager at Fidelity Investments, disagreed that the cross-over holdings factor could tip the scales in Ahmanson's favor.
Fidelity has about 10 million shares in both Great Western and Washington Mutual and another 3.2 million shares in Ahmanson.
Those holdings would allow Fidelity to profit from a deal in either direction, though the firm would probably profit more by a Washington Mutual deal, since it has more Washington Mutual holdings.
"I think, stand-alone or combined with Great Western, Ahmanson stock will do very well. So it doesn't make any difference whether they buy Great Western or not," Rubin said. "It's a win-win-win situation. I don't see how you can lose owning any one or all three of the stocks."
Great Western's annual shareholders meeting where the issue is to be voted on was originally set for April 22. But following the launching of Ahmanson's initial hostile bid, the meeting was indefinitely postponed.
Eight of Great Western's top 15 institutional shareholders currently hold more than 40 million of Ahmanson's 102 million shares of common stock, based on the latest filings with the Securities and Exchange Commission last December.
Meanwhile, only five of the top 15 Great Western shareholders are major holders of Washington Mutual stock, with a combined total of 16 million shares out of Washington Mutual's 126 million shares of common stock.
Ahmanson first launched its $6.5 billion hostile takeover bid worth closer to $5.8 billion as of late last week for Great Western on Feb. 18. That bid was followed by a friendly $6.6 billion competing bid by Washington Mutual on March 7.
Last week, Ahmanson upped its original offer putting forth a new bid originally valued at about $6.8 billion but worth closer to $6.6 billion by late last week. At this point, analysts tend to give the edge to Ahmanson, but it's close.
A Great Western-Ahmanson merger would result in a thrift with $93 billion in assets, while a Great Western-Washington Mutual combination would result in a thrift with $88 billion. Either of the two combinations would constitute the nation's largest savings and loan.
Great Western's only public response since last week's sweetened Ahmanson proposal was to say it is studying the offer, and no other announcements are immediately planned, said spokesman Charlie Coleman.
As of late last week, the two latest bids appeared to be the final ones that Washington Mutual and Ahmanson will put forth in their battle for Great Western.
Washington Mutual announced last week it will not increase its bid in response to the bigger offer from Ahmanson, a position the Seattle thrift plans to stick with, said Washington Mutual spokeswoman Libby Hutchinson.
That means no new bids are likely from Ahmanson either, said Ahmanson spokesman Adrian Rodriguez.
Mike Baxter, a portfolio manager at Hotchkis & Wiley Capital Management, a major shareholder in both Ahmanson and Great Western, agreed with analyst Pitsinger that a deal in Ahmanson's favor could provide a "little more short-term bang" for Ahmanson shareholders.
Still, he emphasized that Ahmanson shareholders are "OK either way" in the long term, no matter which way the deal goes, since Ahmanson itself would ultimately become a takeover target if it loses the bidding war for Great Western.
"I don't think Ahmanson shareholders get penalized (over the long term), because they so clearly become the next best (takeover target) in California, and scarcity becomes a factor," he said.
Hotchkis & Wiley owns about 5 million shares of both Great Western and Ahmanson stock, according to the most recent SEC filings.
A similar assessment was expressed by Dave Winton, an analyst at brokerage Keefe Bruyette & Woods Inc.
"If I'm an Ahmanson shareholder, I'd rather have it happen (in Ahmanson's favor). But as an alternative, there's always the possibility that Ahmanson sells out (to an acquiring institution)," he said.
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