Friday, September 26, 2008

Washington mutual takeover news

This sucks.  I have a highly speculative bet on Washington Mutual preferred.  It runs that I think a takeover is more than 30% likely.  It may be a takeover at 50c a share - which would be awful for the common shareholder.

But I thought it pretty likely.  If you asked me I would have thought 70% likely.  The only problem being that the potential buyers have fires of their own to put out.

Anyway a buy-out by (say) Citi or JPM is not a great end for the common shareholders - but would be wonderful for the preference shareholders.

Nightmare for the preference shareholders is an FDIC takeover which would wipe the prefs as well as the common.

This is of course a wild ass speculative bet.  

But here is a possibility that I hadn't thought of - which is a deal involving private equity consortiums.  That would not be as good as being a pref shareholder in (say) Citi.  I am not sure how legal this would be but these are desperate times - and something could happen.

I suspect the pref would be worth something in this scenario - but I would much prefer the company stick around to take advantage of the Paulson plan.  

I am a little afraid here - this deal is becoming problematic.  The news that Santander - often the dumbest bank on the block - has pulled out - is not good.


Washington Mutual bank explores takeover possibilities: report

NEW YORK (AFP) — The troubled US bank Washington Mutual has approached certain private equity firms as possible candidates to take it over, the Wall Street Journal reported on Thursday.

The private investment groups approached include Carlyle Group and Blackstone Group, which may team up with Texas billionaire Gerald Ford, the daily said, citing sources familiar with the matter.

Questions have arisen over Washington Mutual's future since last week's dramatic collapse of investment giant Lehman Brothers and the government rescue of insurance group AIG.

Washington Mutual's shares have lost 80 percent of their value since the beginning of 2008. On Wednesday the ratings agencies Standard & Poor's and Fitch lowered their ratings of the bank's holding company.

Press reports have mentioned JP Morgan Chase, Citigroup and Wells Fargo as other banking groups possibly interested in taking over Washington Mutual. The Wall Street Journal said Santander of Spain had dropped out of the running.


Anonymous said...

Looks like you lost your bet. FDIC took over WAMU and immediately sold the deposits.

Doubt there's anything left for the shareholders, preferred or otherwise.


Anonymous said...

Could you elaborate on SAN? Why is it "one of the dumbest banks on the block"?
Apart from its investment in Sovereign it seems to have fared quite well so far. I am spanish, and here Botín (its CEO) is considered nothing short of a genius, so I would love to hear some criticism.

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.