Washington Mutual Inc, the savings and loan that lost half its market value in two weeks, rose as much as 24 per cent after the lender was put up for sale and attracted suitors including JPMorgan Chase & Co.
JPMorgan, Citigroup Inc, Bank of America Corp and Wells Fargo & Co may bid for WaMu, three people with knowledge of the talks said. Buyers may be interested only in pieces of Seattle-based WaMu, said the people, who asked not to be identified because the negotiations are private.
Banks may have to merge to survive after the global credit crunch led Lehman Brothers Holdings Inc to bankruptcy, Merrill Lynch & Co into a buyout and American International Group Inc into a government takeover, as Morgan Stanley weighs an alliance with Wachovia Corp. Lenders including San Francisco-based Wells Fargo are scouting for assets now that stock-market declines have wiped out more than $1 trillion in market value from US companies.
“If we could get some deals done, that will add some confidence to the market,” said Jack Ablin, who helps manage about $55 billion as chief investment officer of Harris Private Bank in Chicago. “Banks are as cheap as they’ve been ever, relative to the rest of the market.”
WaMu advanced 32 cents, or 16 per cent, to $2.32 at 11:16 am in New York Stock Exchange composite trading. Its 85 per cent skid this year is the biggest in the 24-company KBW Bank Index.
Brad Russell, a spokesman for Washington Mutual, declined to comment yesterday, as did JPMorgan spokesman Joseph Evangelisti and Wells Fargo spokeswoman Julia Tunis Bernard. Officials at Citigroup and Bank of America in London also declined to comment.
‘Fear and Risk’: WaMu, whose market value plummeted this year on losses tied to sub-prime markets, is drawing interest because of its 2,300 branches and $143 billion in retail deposits, the people familiar with the matter said.
Potential buyers wouldn't be willing to take on the company’s mortgage-related investments, whose losses may total $19 billion over the next 2 1/2 years, according to WaMu’s estimate.
WaMu, led by new Chief Executive Officer Alan Fishman, 62, took a step toward a sale yesterday when its biggest shareholder, TPG Inc, agreed to waive a $1.5 billion payment it had negotiated if the lender is sold. WaMu accepted a $7 billion TPG infusion in April, after rebuffing a takeover offer by JPMorgan CEO Jamie Dimon.
Advice From Goldman: Morgan Stanley analyst Betsy Graseck wrote in a Sept 14 report that JPMorgan would benefit from a presence in the West and Southeast, home to most of Washington Mutual’s branches. “A potential acquisition of WM would be a strategic positive for JPM,” wrote Graseck, who rates the shares “overweight.”
Washington Mutual is being advised by Morgan Stanley and Goldman Sachs Group Inc, a person familiar with the talks said. Goldman, which advised WaMu on the TPG investment, declined to comment through spokeswoman Andrea Rachman.
