In an odd twist on the company's television commercial, Washington Mutual today said it would acquire a California financial institution that would virtually double the size of the Seattle-based thrift.
Washington Mutual's TV ads show a stage coach - presumably Wells Fargo, a buyer of bank branches here in April - coming to Washington state to take local dollars back to California.
It is conceivable the reverse could be true after today's deal.
Fulfilling weeks-old rumors, Washington Mutual said it would issue $1.2 billion in stock to buy one-time thrift bad boy American Savings Bank of Irvine, Calif.
The deal includes American's parent, Keystone Holdings. Washington Mutual said it expects regulatory approval and its own shareholders' clearance by year's end.
"It's a super deal for Washington Mutual, and catapults them into the big leagues," said R. Jay Tejera, a securities analyst with Dain Bosworth in Minneapolis. "It will no longer be just a regional institution. In terms of assets, it will be the largest independent financial institution in the Northwest."
Washington Mutual's assets would balloon from $22.3 billion to $44.2 billion. Washington Mutual already is in five states and is Washington and Oregon's No. 1 mortgage lender.
The combined company would have 406 branches in seven states. American Savings is California's No. 2 mortgage lender. Counting loan offices, the total would jump from Washington Mutual's 317 sites to the pair's 537.
Washington Mutual would distribute as many as 48 million shares to two entities. Keystone would receive 26 million initially, and the Federal Deposit Insurance Corp. would receive 14 million. A total of 8 million shares would be set aside for distribution depending on the outcome of a Keystone lawsuit against the government.
The suit relates to how Keystone, a private group, was compensated when it agreed in 1988 to take American Savings off regulators' hands.
American Savings was the first major thrift to discover in the early 1980s that borrowing short-term funds and loaning them for long periods had a downside. The FDIC was forced to take over the institution to keep it afloat.
Eight years ago, Keystone, headed by legendary investor Robert Bass of Fort Worth, Texas, acquired majority control of American Savings from the FDIC.
By all accounts, the institution has prospered under Bass. Because of his control of Keystone, Bass would own 8 percent of 107-year-old Washington Mutual after the deal, making him the single biggest individual shareholder.
Bass, with Washington Mutual approval, would appoint two members to the bank's board. But neither is expected to be Bass, said Kerry Killinger, Washington Mutual chairman.
Although Bass has been known for hands-on dealings, Killinger said he specifically spoke to Bass about such matters as recently as yesterday and was assured "he'll be a good, long-term shareholder."
That remains to be seen, Tejera said.
Washington Mutual, whose headquarters would stay in Seattle, would become the nation's 24th largest banking institution.
"This is a landmark day for Washington Mutual and for our industry," Killinger said. "Through this combination, we are creating one of the leading consumer-financial-services companies in the West."
To adjust for American's larger loan-loss reserve and account for other acquisition costs, Killinger said his company expects to take a $200 million charge at year end.
Washington Mutual said the FDIC would sell its newly acquired shares. Because the two companies are so geographically diverse, no branch closures are expected.
Washington Mutual stock rose $4.25 a share to a record $34.375 near the close of trading today.