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



Providian Holders to Vote on Acquisition
Monday August 29, 10:12 am ET
By Allison Linn, AP Business Writer

Providian Financial Shareholders to Vote on Acquisition by Washington Mutual

SEATTLE (AP) -- Is Washington Mutual Inc.'s plan to acquire Providian Financial Corp. a match made in financial heaven or a raw deal for Providian investors?

That's the question Providian's investors will face Wednesday when they are asked to approve the acquisition.

The stock and cash deal -- valued at $6.45 billion, or around $18.71 per share -- is being opposed by one of Providian's largest shareholders, Putnam Investments LLC, and the investment research firm Glass, Lewis & Co. But others, including influential advisory firm Institutional Shareholder Services, have recommended that shareholders approve the deal.

Seattle-based Washington Mutual and San Francisco-based Providian, a credit card issuer, have both repeatedly said that they think the deal is fair. Washington Mutual expects to use Providian to break into the $800 billion credit card industry.

Those who oppose the deal contend that Providian is worth more than the asking price, which represented just a 4 percent premium over its closing stock price around the time of the June 6 announcement. Shares of the company rose 9 cents to $18.27 in morning trading Monday on the New York Stock Exchange, where they have traded from $14.32 to $19.28 in the past year.

The once-troubled company has over the past few years turned itself around, which some say make it both an attractive takeover target and a strong stand-alone company. The acquisition also comes amid increasing consolidation in the industry, which some argue has made Providian a rare -- and therefore more valuable -- commodity.

Such factors led Putnam, which owns about 7.5 percent of the company, to believe that the company would be better off either staying on it own or finding a better offer.

"Our beef is with the price," said David King, a senior portfolio manager with Putnam.

Experts at Glass Lewis say the deal should be valued at between $21 and $24 per share. In opposing the plans, Glass Lewis also argued that it doesn't think Providian shopped itself around enough before striking a deal with WaMu, the nation's largest savings and loan. They also argue the deal appears to be too sweet for management, at the potential expense of shareholders.

Providian spokesman Alan Elias said company executives did talk to other financial institutions before agreeing to do a deal with WaMu. He declined to comment on how the deal affects top management.

"We continue to feel that the merger is fairly priced and will be beneficial to shareholders," Elias said.

He noted that other independent groups have supported the deal.

In its analysis, Institutional Shareholder Services said it believes the market had already incorporated the value of an expected acquisition into the share price, which is why the offer wasn't higher.

"While we recognize that the offer value may not be the maximum price that could have been achieved, we do believe that the offer falls within an appropriate range," ISS said in recommending that shareholders support the deal.

Rick Shane, an analyst with Jeffries & Co. who follows Providian, said he thinks many outside the industry could view the deal as underpriced because they perceive the sector to be growing quickly. But Shane thinks ever-more intense competition will make it tough for such companies to continue to grow as quickly as they have been, which is one reason the Providian deal is valued where it is.

"Industry participants are looking at a reality that perhaps outsiders don't have a perspective to see at this point," he said. "A year from now, it may all make a lot more sense."

Shares of Washington Mutual rose 19 cents to $40.94 in trading on the NYSE. They have traded in a 52-week range of $37.51 to $43.90.




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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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