Fixer Upper: Downey Savings For Sale After Stock Plunges 94% YTD
I have gotten a lot of things wrong in my career. But my thesis, in 1995, that the stock of Downey Financial Corp. (DSL-NYSE) was a layup because the aging founder would eventually sell franchise, has been proven correct. Of course, my timing was off by about 13 years:
Reeling from a growing pile of delinquent mortgages, Downey Financial Corp. on Thursday reshuffled its top management and signaled that it would seek to sell the company. But analysts said it would have trouble finding a buyer.
Highlighting the gravity of Downey's circumstances, Maurice L. McAlister, the company's chairman and co-founder, gave up his position after running the thrift company for a half-century. Also leaving the Newport Beach-based operator of Downey Savings & Loan was Chief Executive Daniel D. Rosenthal, McAlister's former son-in-law.
McAlister, 83, who owns a 20% stake in Downey, had retained tight control through good times and bad, but in recent years the ranks of executives under him changed frequently. On Thursday, the company named its chief operating officer, Tom Prince, to be interim chief executive -- making him the company's fourth CEO in four years. LA Times
Alas, finding a buyer might not prove to be so easy. Mr. McAlister should have parted with his baby years ago; perhaps he should have taken a hint when Herb and Marion Sandler sold Golden West Financial, pretty much top-ticking the market for real estate and financial stocks.
I bought the stock in 1995 figuring Maurice would come to his senses after exploring, and rejecting a sale. He was 70 at the time, and I figured he had better things to do than putter around the bank. But this is a sad ending for a man who could not let go.
This isn’t the first time Downey has considered a sale. In 1993, the company hired an investment bank to assess its options for the future, and its stock soared on takeover speculation. But the sale never happened, and shareholders punished the stock...."He’s been the only reason they haven’t been sold,” Garrett said. “It’s human nature. I’ve seen it in a lot of boardrooms: ‘This has been my baby, my family, something I’ve nurtured for 50 years.’ ”
But lets face it, buyers could be scarce.
Some healthy banks such as Wells Fargo & Co. might want to kick Downey’s tires, Miller of FBR Capital Markets said.
But now is certainly not a good time to be selling a bank, said Jason Arnold, a consultant with RBC Capital Markets in San Francisco.
“I’m not particularly optimistic there will be a big frenzy of buying right now,” he said, “for them or anyone else.”
There are a lot of horror stories out there, but wiping out 50 years of hard work, a life’s work, has to rank right up there with the worst of them.
Happy Trails, Maurice.
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Nice run, up to a point
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Reeling from losses, Downey Financial shakes up leadership
LA TImes
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