Holy Crap! Wachovia To Buy Golden West Financial

Whoa! One of my favorite stocks on the Buy List is being bought out. This is a HUGE deal.
Wachovia (WB) just announced that it’s going to buy Golden West Financial (GDW) for $25 billion. Wachovia will pay GDW shareholders $18.65 a share in cash, plus 1.051 shares of Wachovia stock. That works out to $81.07 a share, which is about a 15% premium on Golden West’s closing price from Friday.
Wachovia is making a major move to extend its reach into the Western part of the United States. Here’s more from the New York Times:

The deal clears up concern some investors had over the question of succession at Golden West. It has been run for decades by husband-and-wife co-chief executives, Herbert M. and Marion O. Sandler, both in their 70’s and noted for their public criticisms in recent years of Federal Reserve policy, regulators and even President George W. Bush.
Under their leadership, the thrift had a long track record of ignoring hot Wall Street trends, like trading exotic derivative products, staying focused for the most part on the business of making loans. Keeping it simple has been a prosperous business model for Golden West, particularly as it built up its mortgage-lending business in recent years in the red-hot California market by offering adjustable-rate mortgages.
Formed in 1963, Golden West’s assets today total more than $100 billion and it has posted strong double-digit per-share earnings for decades. While the deal will give Wachovia a strong foothold in the mortgage-lending space, there are growing concerns among investors and Wall Street analysts that growth in that business may have peaked as interest rates creep higher. For instance, mortgage applications have been on the decline in recent months.

My first thoughts are to congratulate Herb and Marion on building a terrific business. For decades, Golden West has been one of the best run thrifts in the country.
Gertrude Stein said about Oakland that “there is no there there.” Well, there is a great savings and loan there, and its owners are about to become a lot richer.

Posted by on May 8th, 2006 at 12:18 am


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