The Shareholder Forum

Special Program


Independent Analysis of Shareholder Interests

in a merger transaction proposed by

Providian Financial Corporation

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Providian Program Home Page

Program Summary

(August 10, 2005)

     In response to publicly expressed investor concerns about the pricing of a merger transaction proposed by the management of Providian Financial Corporation (“PVN”), a special “Forum” program has been initiated for the limited purpose of arranging an independent analysis of shareholder interests.

     The program is intended to develop a broadly applicable process for providing public shareholders with objective, professional analyses of transaction proposals, as an alternative to the current practice of relying on “fairness opinions” presented by a transaction’s proponents.

     Anyone with an interest in Providian or in the general objective of assuring informed investment decisions  is encouraged to participate in the program, which will be managed by Gary Lutin according to the usual Forum policies.

August 10, 2005




Glass, Lewis & Co., an independent research research and proxy advisory firm serving institutional investors, published a report on August 19, 2005 and granted permission for its use in this Forum program.  A summary section is copied below, and the full report can be downloaded from this link:


P R O X Y   P A P E R  


Jason McCandless, Lead Analyst
Published: August 19, 2005

Providian Financial Corp
Industry: Regional Banks
Meeting Date: August 31, 2005
Record Date: August 1, 2005




[page 5]

Providian Financial Corporation (“Providian”) has entered into a merger agreement with Washington Mutual, Inc. (“Washington Mutual“) valued at approximately $6.5 billion. Providian shareholders have been offered 0.45 shares of Washington Mutual common stock in exchange for each share of common stock they hold. The stock consideration will be paid 89% in Washington Mutual common stock and 11% in cash. In all, shareholders have been offered consideration valued at approximately $18.71 per share of Providian they hold.

This amount represents a premium of approximately 4.4% over the closing price of the Company’s shares one day prior to the announcement of the agreement and a 12.5% premium over the average closing price during the thirty days prior to announcement.

For the reasons more fully discussed below, we believe shareholders should oppose this transaction.

First, the deal represents a small premium to market trading prices and was struck without a market test or auction; no other potential buyers were contacted. We now know there were several other buyers in the market for monoline credit card companies and we suspect, with an effective process, a better result could have been achieved and would be achieved today. Rejection of this proposal will both serve as a signal to this board (and other boards) that competitive processes should be used to achieve better outcomes and will empower this board to negotiate a better deal, potentially even with this buyer.

Second, Providian is performing strongly, as reflected in analyst estimates for 2005 EPS that have increased from $1.17 to $1.59 since April 2004. The Company did not need to do a deal and certainly did not need to do a deal at such a modest premium. Shareholders have a perfectly good alternative: keeping the company independent. No one has suggested otherwise.

Third, opposing this transaction provides shareholders with the option to seek appraisal rights in Delaware Court after the closing. Essentially, if an investor sends a notice to the Company of an intent to exercise appraisal rights (and then votes against the deal or does not vote) and the deal is nevertheless approved, the investor has a 60-day option to have the Court decide on fair value. While it is hard to know what the Court will do, it seems very unlikely that the Court will conclude the stock is worth less than the trading value before the deal was announced; with such a small premium at risk, the 60-day option (and the opportunity to get a higher value from the Court) may be a better option.

In short, we believe this transaction is not compelling in any way. It is the product, in our view, of a flawed process. Its small premium certainly does not warrant investor excitement and we strongly believe that the Company standing alone or pursuing some other deal will likely yield a better financial outcome for investors. By our math, this Company is worth between $21 and $24 in the merger market today.

For these reasons, we recommend that shareholders vote AGAINST this proposal.


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This public program addressing shareholder interests in Providian Financial Corporation (PVN) was initiated with the leadership support of Putnam Investment Management, and according to the Forum’s stated "Conditions of Participation" is open to all shareholders of the subject company and to any fiduciaries or professionals concerned with their decisions. In all cases, each participant is expected to make independent use of information obtained through the Forum, and participation is considered private unless the party specifically authorizes identification.

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