Golden State to Buy CenFed for $210 Million

Marking the latest acquisition in California’s fast-consolidating thrift industry, the parent of Glendale Federal Bank said Monday that it has agreed to buy Pasadena-based CenFed Bank in a stock swap valued at $210 million.

For Glendale-based Golden State Bancorp Inc., whose Glendale Federal is the state’s sixth-largest savings and loan, with assets of $16.2 billion and 200 branches and loan offices, the deal would be its fifth acquisition in two years and would help the institution known for its feisty marketing to push further into business and consumer banking.

Like many thrifts, Glendale Federal and CenFed have been moving away from the traditional emphasis on mortgage loans to other services to compete with banks.

CenFed, whose parent company is CenFed Financial Corp., is a small but respected institution with $2.3 billion in assets. It has a portfolio of $125 million in Small Business Administration loans. CenFed’s 18-branch system would also enable Glendale Federal, which recently changed its holding company’s name to Golden State Bancorp Inc., to extend its presence in the Inland Empire and Orange County. CenFed’s principal market is Pasadena. which was a particular attraction to Glendale Federal.

“Glendale Federal is focusing on the small-business customers, and that’s what CenFed is doing,” said Caren Mayer, a thrift analyst at Montgomery Securities in San Francisco. Mayer said Glendale Federal’s strategy is to build on the relationship of CenFed’s SBA loan customers.

The acquisition, which would be of the holding company, requires regulatory and shareholder approval. It would probably to result in some branch closures and job cuts, officials said. The deal is expected to close in 1998.

CenFed Financial has 400 full- and part-time employees; seven of CenFed’s branches are within a mile of an existing Glendale Federal office.

The deal calls for a tax-free transaction in which 1.2 shares of Golden State common stock would be issued for each share of CenFed common stock. Based on Friday’s closing prices, the deal is valued at $210 million.

Golden State stock closed down 50 cents at $28.19 on the New York Stock Exchange. CenFed closed down 62.5 cents at $33.38 on Nasdaq.

Richard Fink, vice chairman at Golden State Bancorp, said he expects the acquisition to be immediately accretive to the company’s earnings.

The acquisition was not a surprise because CenFed was seen as an attractive takeover target. California’s thrift industry has been rapidly consolidating in recent years as the state’s economy has rebounded and more banking institutions have sought to grow again after years of internal restructuring. In the last 12 months, three of the largest S&Ls; in the state--California Federal Bank, American Savings Bank and Great Western Bank--have changed hands.

The CenFed acquisition would drop the number of thrifts in the state to 56, down from 85 three years ago and a high of 210 in the mid-1980s, according to the Western League of Savings, an industry association.

Glendale Federal Bank, although itself considered a possible takeover candidate, has been on a buying spree that began when it bought nearly all the branches of Los Angeles-based Union Federal Bank in mid-1995. In May, Glendale Federal’s parent bought TransWorld Bank, a 12-branch bank based in Sherman Oaks that also had a sizable SBA portfolio.

Mayer, the analyst, said Glendale Federal Bank remains a takeover target. And that, she said, may have been an attraction to CenFed executives, because they would figure to benefit from any such deal. Moreover, Glendale Federal also could benefit richly from its $1.5-billion breach of contract lawsuit against the U.S. government, involving supervisory goodwill.