IR Magazine (, September 2, 2005 report

The Shareholder Forum

Special Program


Independent Analysis of Shareholder Interests

in a merger transaction proposed by

Providian Financial Corporation

Forum Home Page


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





The IR behind the Providian deal

Juggling investor opposition and a media frenzy
September 2, 2005

San Francisco, CA -- After much speculation in the media, shareholders of Providian Financial approved its merger with Washington Mutual (WaMu) on Wednesday. The deal was the subject of much debate with one of Providian's biggest shareholders publicly opposing the merger and the company's proxy firm, Institutional Shareholder Services (ISS), being criticized in the media.

The media frenzy tipped off when Putnam Investments, one of Providian's major holders with 7.5 percent of shares outstanding, went public with its stance against the deal. In a very unusual move, Putnam published a press release saying the bid price was too low. 'In a consolidating industry and in light of the recently announced Bank of America/MBNA transaction, mono-line credit card companies such as Providian represent an increasingly scarce asset that should command a higher price,' wrote Putnam on August 1 about WaMu's offer.

Jack Carsky, senior VP of IR at Providian, was surprised by Putnam's decision to go public with its view. 'When Putnam put out that press release that moved everything up a notch and that was almost unprecedented,' he says. 'I can't think of a case Putnam has ever done that; the CEO, the CFO and myself spoke to Putnam's portfolio mangers and their analysts in a couple of occasions on June 6 [when the offer was first announced] and a couple of days later.'

Carsky notes that communication with Putnam was constant, before and after the press release came out. 'The lines of communications were very good and we understood their point,' he says. 'We respected their point, but we still felt that based on everything we knew that we were getting the best offer for our shareholders.'

Soon after Putnam's announcement the media criticized ISS' role in the deal. A New York Times' column by Gretchen Morgenson questioned ISS' integrity noting it was giving advice to both management and shareholders, posing a potential conflict of interest, and also that in voting in favor of the current bid, shareholders would give up their right to an independent appraisal of the deal. Morgenson also mentioned ISS' refusal to reveal whether any of its clients were key players in the deal. ISS then accused Morgenson of defamation.

Proxy firms were divided on this deal. ISS and Proxy Governance supported the offer while Glass & Lewis and Egan-Jones weren't in favor of the deal's terms.

'While we expected some push back because Putnam voiced their displeasure so loudly on the first day of the announcement and then subsequently in that press release, we didn't expect to see a pile on by the press and the proxy governance services like this,' notes Carsky. 'At that point we were just kind of standing on the side lines looking at all these people taking pot shots at each other wondering what we did wrong in the middle of it all.'

As for ISS, Carsky defends Providian's choice in taking advice from the proxy firm. 'Whether people deem them to be objective or not, ISS gives you the opportunity to essentially speak your case, and they take their time to understand management,' he says. 'To Glass Lewis' fault they don't do that, they just take whatever is contained in the proxy - they don't talk you.'

At the end of the day, Providian's merger was approved with 83 percent of total voting shares approving the merger (or 67 percent of the total outstanding shares).

There is a lesson learned here, says Carsky. 'Never underestimate. We went into this thinking there shouldn't be much of a problem especially after we got the ISS blessing,' he says. 'You can ever underestimate the possibility of other entities making their voices heard for whatever reason.'

by Vanessa Theiss








Inquiries, requests to be included in email distribution lists, and suggestions of new Forum subjects may be addressed to

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.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.