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GREAT WESTERN FINANCIAL CORPORATION
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[GREAT WESTERN FINANCIAL CORPORATION AND WASHINGTON MUTUAL, INC.
LETTERHEAD]
Media Contact: Washington Mutual Washington Mutual
(East Coast) (West Coast)
Gavin Anderson & Libby Hutchin-
Company son/Terry Onustack
Michael Geczi/Hollis 1-800-228-9268
Rafkin-Sax
212-373-0230/0234
Great Western Great Western
Abernathy MacGregor Ian Campbell
Michael Pascale/Steve (through March 6)
Bruce 212-371-5999
212-371-5999 Charlie Coleman
818-775-3766
Investor Contact: Washington Mutual Great Western
Karen Christensen John Trotter
206-461-6329 818-775-8456
James Fitzgerald
206-461-4331
March 6, 1997
FOR IMMEDIATE RELEASE
Washington Mutual to Combine With Great Western
Through Stock Merger;
Accord Creates Third-Largest
Banking Institution in the West
SEATTLE, Washington and CHATSWORTH, California -- In a
move that would significantly expand Washington Mutual, Inc.'s position
in California, Washington Mutual (Nasdaq: WAMU) and Great Western
Financial Corporation (NYSE: GWF) today jointly announced the signing of
a definitive merger agreement.
Terms of the transaction call for the tax-free exchange of
0.9 share of Washington Mutual common stock for each of Great Western's
outstanding common shares. Based on Wednesday's closing price of $53.25
per share for Washington Mutual common stock, this ratio represents a
price of $47.93 per share of Great Western stock. At that price, the
transaction has an initial value of $6.6 billion, and the combined
company would have a pro forma market capitalization of $12.9 billion.
Each share of Great Western 8.30% cumulative preferred stock would be
converted into one share of a new series of Washington Mutual preferred
stock with substantially the same terms.
Following the merger, Washington Mutual would have
combined consolidated assets of $87.4 billion, based on year-end 1996
results. It would have $52.7 billion in deposits, more than 1,000
mortgage-lending, retail and business banking offices, 502 consumer
finance offices and serve 4.1 million households. Moreover, Washington
Mutual would rank third in deposits in the state of California -- a state
it entered in 1996 with its acquisition of American Savings Bank.
Overall, Washington Mutual would rank as the third-largest bank in the
western United States.
The transaction, which would be accounted for as a pooling
of interests, is anticipated to close in the third quarter of 1997.
Already approved by the boards of both companies, the acquisition
requires the approvals of the Office of Thrift Supervision and
shareholders of both companies.
"This transaction will enable us to significantly expand
our presence in California, the nation's largest consumer market, and
solidify our position as one of the West's top banking franchises,"
stated Kerry Killinger, Washington Mutual's chairman, president and chief
executive officer, who will continue in his current positions following
the transaction.
"The combination brings together two strong companies,
which have been industry leaders in moving from the traditional thrift
model to that of a consumer bank. Most importantly, it will create a
company that is positioned for long-term growth, and the delivery of
enduring value to all of our key constituencies shareholders, employees,
customers and communities.
"We have structured a transaction that is driven by
strategic business fundamentals and one that we believe will produce
long-term revenue enhancements plus meaningful cost savings. The
transaction is anticipated to be accretive to earning within 12 months of
completion."
Killinger added that Washington Mutual would begin
immediately to work with the management team of Great Western to ensure
the successful conclusion of the transaction in the most timely manner.
Washington Mutual has completed 22 acquisitions since 1983.
John F. Maher, president and chief executive officer of
Great Western, added; "We are most pleased to be joining forces with
Washington Mutual, which is one of the premier banking franchises in the
western United States and one of the most successful and respected banks
in the country. Washington Mutual and Great Western share similar
strategies, cultures and operating goals. The combination of our
companies is unique and provides the best fit for two outstanding
franchises. The merger makes compelling economic sense for stockholders
and will yield significant benefits to our customers, employees and
communities.
"It is a testament to the hard work and dedication of
Great Western's employees that Washington Mutual has chosen to enter into
this agreement with us," added Maher. "Their skills and professionalism
have made Great Western one of the finest companies in the banking
industry and their continued efforts and enthusiasm will make for an even
stronger and more dynamic company."
Robert Bass, Washington Mutual's largest stockholder,
said: "Washington Mutual has a demonstrated track record of acquiring and
successfully growing financial institutions. The combination of
Washington Mutual and Great Western would accelerate this trend. As
shareholders, we have great confidence in management's ability to
undertake and maximize the value of this acquisition --not only for
investors, but for employees, customers and the communities Great Western
serves."
Additional Terms of the Transaction
Great Western has agreed to pay a $75 million fee plus
documented expenses not exceeding $20 million to Washington Mutual if the
merger agreement is terminated under certain circumstances. Moreover, if
within 18 months of termination Great Western engages in a business
combination with another party it would pay an additional $100 million
fee.
Four current Great Western directors would be added to
Washington Mutual's board upon consummation of the merger.
As part of the transaction, Washington Mutual will incur a
pre-tax charge of $440 million ($278 million net after-tax), including an
addition to loan-loss reserves of $100 million. Administrative and
operations areas will be combined by the second quarter of 1998.
A Business Combination Predicated on Growth
The acquisition would greatly accelerate Washington
Mutual's growth in California, the nation's most populous state.
"Our integration of American is on schedule and is
factored into our timetable for Great Western," Killinger stated. "In
fact, our consumer-banking strategy is showing initial signs of success
in California, with new checking account openings and residential
mortgage originations both proceeding at a brisk pace, ahead of last
year.
In addition to building one of the largest banking
franchises in the western United States, through the merger Washington
Mutual would enter Florida, where Great Western at year-end 1996 had $7.1
billion in deposits, representing the No. 5 market share (8 percent).
Many of its households are located in the affluent counties of Dade,
Broward and Palm Beach. Overall, Great Western operates 120 branches in
nine Florida counties, and serves nearly 650,000 households. "Consistent
with our strategy in other states, we will look for opportunities to
profitably grow our business in Florida," Killinger said.
It is anticipated that additional revenues would be
generated by the selective expansion of Great Western's consumer finance
subsidiary, Aristar, Inc., which offers a diversified portfolio of
personal, secured real estate and retail finance loans. Currently,
Aristar operates 502 branches in 23 states, with its largest operations
in Tennessee, North Carolina, Florida, South Carolina and Louisiana.
"We have previously stated our intention of entering
businesses that offer attractive margins that can augment our core
consumer banking operations," Killinger said.
Shareholder Value
Both companies believe that significant -- and enduring --
shareholder value will be created in the transaction as a result of the
combination of revenue-enhancement opportunities; cost savings; the
blending of strong and like-minded management teams; the creation of a
strong and low-risk balance sheet, and earnings accretion.
"The transaction provides immediate value to Great
Western's stockholders and will further the business strategies of our
two companies," Maher stated. "We believe the prospects for creating
long-term stockholder value are compelling."
Integration
It is anticipated that a total of 200 branch and loan
offices will be consolidated as a result of the transaction, most of
which are located in overlapping markets in California. "Washington
Mutual is a collection of very talented people, many of whom have joined
us from past acquisitions," Killinger said. "Because of growth in our
company, we believe there to be many opportunities for top-producing
sales and production staff at consolidating locations."
Total annual pre-tax expense reductions, on a combined
basis, are anticipated to total $208 million in 1998, and $340 million in
1999. As part of the combination, Great Western Bank and American Savings
Bank will merge and operate under the single Great Western name in
California and American's other states of Arizona, Nevada and Colorado,
where it operates loan offices. Killinger pointed out that because
Washington Mutual and Great Western share the same kind of deposit and
loan-servicing systems, conversion is expected within six months of
closing.
As a result of the systems conversion, Great Western will
receive Washington Mutual's new branch and lending front-end systems, new
product's (including combined statements, combined cash cards, pay by
phone and home banking) and new productivity tools for internal use.
Community Issues
Washington Mutual's banking subsidiaries, including
American Savings Bank, and Great Western's primary banking subsidiary,
Great Western Bank, have "outstanding" Community Reinvestment Act (CRA)
ratings. Killinger said that the added financial strength of a combined
Washington Mutual/Great Western would enable more families and
individuals throughout the West -- and nationally -- to obtain financing
for homes. "Over the years, Washington Mutual and Great Western have
demonstrated that we are serious about our commitment to our communities.
We intend to continue to pay close attention to meeting the credit needs
of low-to moderate-income and minority neighborhoods as a combined
company."
With assets of $42.9 billion at year-end, Great Western
Financial is a diversified financial services company operating more than
1,150 mortgage lending, retail banking and consumer finance offices
nationwide. The company's principal subsidiary, Great Western Bank, is a
mortgage-oriented consumer bank with banking branch networks in
California and Florida.
With a history dating back to 1889, Washington Mutual is a
diversified financial services company focusing on families and small-to
medium-size businesses. At year-end, Washington Mutual and its
subsidiaries had assets of $44.6 billion and operated more than 550
offices in Washington, California, Oregon, Idaho, Utah, Montana, Arizona,
Colorado and Nevada. The company's subsidiaries provide consumer and
commercial banking, full-service securities brokerage, mutual fund
management and insurance underwriting.
# # #
This press release contains forward-looking statements
regarding the benefits of the merger of Washington Mutual and Great
Western, including cost savings to be realized, earnings accretion,
transaction charges and additional loan-loss reserves and revenue
enhancement opportunities following the merger. Actual results may vary
materially from the forward-looking statements as described in Washington
Mutual's Current Report on Form 8-K dated March 6, 1997, to which
reference is made. These factors including without limitation possible
delays in integration of Great Western operations into Washington
Mutual's, increases in interest rates which could reduce net interest
margin, competitive factors which could adversely affect consumer banking
strategy and general economic conditions which negatively impact the
volume of loan origination and amount of loan losses.
# # #
Editor's Note: Kerry Killinger and John F. Maher will
participate in a telephone conference call for reports at 1:00 p.m.
Eastern Standard Time on Thursday, March 6. To participate in the
conference, please call 1-800-753-9057 by 12:50 p.m. EST. International
participants can call 913-661-9057.
Executive photos, service-area map, and logos are
available through Business Wire/AP Photo Express. Additional photos will
be available later today.
# # #
Washington Mutual/Great Western
At-A-Glance
December 31, 1996, figures (all dollar figures in millions, except per
share prices). Financial ratios reflect year-to-date figures.
Washington Great Pro Forma
Mutual Western
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Total Assets $44,552 $42,875 $87,427
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Total Deposits $24,080 $28,587 $52,667
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Total Loans $30,331 $30,823 $61,154
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Net Income1 $114.3 $115.8 $230.1
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Nonperforming Assets $329.5 $471.8 $801.3
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Nonperforming Assets/Assets 0.74% 1.10% 0.92%
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Reserves2 $363.4 $313.7 $777.1
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Reserves/Nonperforming Loans2 160.52% 89.12% 134.4%
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Stockholders' Equity/Assets 5.38% 6.05% 5.44%
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Book Value Per Share $19.30 $17.63 $18.22
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Closing Stock Price Per Share $53.25 $45.00
(3/5/97)
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Market Capitalization (billions) $6.3 $6.2 $12.9
(3/5/97)
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Branch Locations 413 416 829
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Loan Offices 96 220 316
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Commercial Bank Offices3 48 -- 48
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Total Banking Locations 557 636 1,193
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Consumer Finance Offices -- 502 502
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Households Served (millions) 1.4 2.7 4.1
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Employees 9,500 12,000 21,500
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1 Includes SAIF Recapitalization and other nonrecurring after-tax
charges of $294.6 million for Washington Mutual and $195.2
million for Great Western
2 Reflects $100 million addition to loan-loss reserves
3 In addition, Washington Mutual has 14 Business Banking Centers
