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The Shareholder Forum

The Shareholder Forum supports investor interests in corporate enterprise value with services that require independence – and that may benefit from the Forum’s network resources and recognition for advocacy of long term investor interests – to assure a definition of relevant issues and fair access to information that can be relied upon by both corporate and investor decision-makers.

The policies that provide a foundation for the Forum’s marketplace functions have been carefully developed and tested to allow any investor to participate in its communications, either anonymously or visibly, without acting in concert. Established originally to accommodate professional fund managers, this independent moderator function has proved to be consistently effective in managing orderly processes of issue definition for rational analysis by fiduciaries who are responsible for informed decisions.

Initiated in 1999 by the CFA Society of New York (at the time known as the New York Society of Security Analysts) with lead investor and former corporate investment banker Gary Lutin as guest chairman to address the professional interests of its members, and independently supported by Mr. Lutin since 2001, Forum programs have achieved wide recognition for their effective definition of important issues and orderly exchange of the information and views needed to resolve them. The Forum's ability to convene all key decision-making constituencies and influence leaders has been applied to subjects ranging from corporate control contests to the establishment of consensus marketplace standards for fair disclosure, and has been relied upon by virtually every major U.S. fund manager and the many other investors who have participated in programs that addressed their interests.

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Special Program


Independent Analysis of Shareholder Interests

in a merger transaction proposed by

Providian Financial Corporation



Program Index



Independent Analysis of Glass Lewis




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.


This proxy analysis is confidential and may not be reproduced in any manner without the written permission of Glass, Lewis & Co. This analysis is not intended to solicit proxies and has not been submitted to the Securities and Exchange Commission for approval. No warranty is made as to the completeness, accuracy or utility of this analysis. This analysis does not constitute investment advice and investors should not rely on it for investment or other purposes.

Glass Lewis does not provide consulting services to issuers. Some institutional investor affiliates of issuers have purchased a subscription to Glass Lewis' services, which is disclosed on the relevant Proxy Paper. In addition, advisors to issuers (such as law firms, accounting firms, ratings agencies and others) may subscribe to Glass Lewis’ services. Glass Lewis does not discuss individual Proxy Papers with any entity prior to publication.




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