SAN FRANCISCO (AP) -- Providian Financial
Corp.'s shareholders on Wednesday accepted Washington Mutual Inc.'s
$6.5 billion takeover bid, brushing aside concerns that one of the
nation's last independent credit-card lenders could have been sold for
a higher price.
A total of 197.5 million Providian
shares, or 67 percent of the common stock outstanding, supported the
deal, clearing the way for Washington Mutual to complete the
acquisition Oct. 1.
San Francisco-based Providian announced
the vote during an uneventful 10-minute special meeting that ended
several months of debate about whether Seattle-based Washington Mutual
-- the nation's largest savings and loan -- is paying enough to buy a
credit-card company that will help it diversify beyond home mortgages.
Investors began to express their
misgivings about the sale price almost as soon as Washington Mutual
first unveiled its cash-and-stock bid of $18.71 per share. That was
just 4 percent above Providian Financial's stock price before the deal
was announced in early June, an unusually low premium.
After slipping after it first struck
the deal, Washington Mutual's shares have bounced back. The company's
shares rose 44 cents Wednesday to close at $41.58 Wednesday on the New
York Stock Exchange, where Providian's shares rose 24 cents to close
After nearly failing in late 2001 amid
an avalanche of loan problems, Providian bounced back under a new
management team that boosted the company's profits by cleaning up the
credit-card portfolio and cutting costs in a streamlining that shed
about 10,000 workers.
Providian now employs 3,200 workers,
most of whom are expected to be retained. The credit-card lender has
9.5 million accountholders with $18.6 billion in outstanding loans
The complaints about Providian's price
amplified earlier this summer after Bank of America Corp. agreed to
buy MBNA Corp. for $35 billion -- a 31 percent premium. Some analysts
argue that deal isn't an apples-to-apples comparison to Washington
Mutual's bid for Providian because MBNA's loan portfolio is less
Nevertheless, Putnam Investments LLC,
one of Providian's largest shareholders with a 7.5 percent stake, took
the unusual step of publicly opposing the Washington Mutual bid,
hoping to force Providian's board to go back to the negotiating table
or solicit other offers.
Two investment advisory firms also
advised Providian's shareholders to reject the Washington Mutual bid
because of the financial terms.
Glass Lewis & Co., the most strident
critic, argued Providian might fetch as much as $24 per share, nearly
$2 billion above Washington Mutual's offer, if the board were more
But two other advisory firms favored
the deal, and Providian's board never wavered from its position that
it had extracted a fair price from Washington Mutual.
"I can honestly say there is nothing we
left on the table," Providian Chairman Joseph Saunders said during an
interview after Wednesday's meeting. Saunders said Providian held
discussions with a significant number of prospective bidders in the
United States and abroad before accepting Washington Mutual's offer.
Greg Taxin, the chief executive for
Glass Lewis, remains convinced that Providian's shareholders are
getting shortchanged. He argued the deal won approval because many of
Providian's largest shareholders -- mostly mutual funds and pension
funds -- own even larger stakes in Washington Mutual, giving them a
financial incentive to accept the lowball offer.
"Those shareholders wanted it to go
through because they realized Washington Mutual is getting a great
bargain and they will benefit from the unfair price," Taxin said
The list of major shareholders with
stakes in both Providian and Washington Mutual includes the Vanguard
Group, Legg Mason Capital Management, Northern Trust Global
Investments, Franklin Portfolio Associates, Barclays Global Investors,
New York State Common Retirement Fund and the California Public
Employees Retirement System.
Saunders, who lifted Providian's shares
from a low of $2 reached shortly before his November 2001 hiring as
CEO, will be one of the big winners in the Washington Mutual takeover.
He is line for a $9 million cash payment when the deal closes and will
continue to run Providian under a new three-year contract that could
pay him another $9.6 million in salary and bonuses, according to
documents filed with the Securities and Exchange Commission.
After the deal is completed,
Providian's board and top executives, including Saunders, also will
vest in a total of 3.5 million stock options and shares of restricted
stock, according to Glass Lewis' analysis, setting the stage for
another big windfall.
"We took a
significant risk to go to work for Providian and we did our job,"
Saunders said of the management team that turned around Providian.