Putnam Investments, one of the nation's largest money managers, said Monday it will oppose Washington Mutual's bid to acquire credit card issuer Providian Financial Corp. because the deal price is too low.
Putnam Investments, one of the nation’s largest money managers, said Monday it will oppose Washington Mutual’s bid to acquire credit card issuer Providian Financial Corp. because the deal price is too low.
The mutual fund giant, which controls about 7.5 percent of Providian’s outstanding shares, called the deal “well below the fair market value” in light of a recent consolidation spree within the credit card industry. Putnam, a unit of insurance broker Marsh & McLennan, said the Providian shares it controls are held within its mutual funds.
Providian is one of the largest independent credit card issuers in the nation, and part of a dwindling breed as similar companies have been snapped up by large financial institutions in recent years. Bank of America announced on June 30 it would acquire MBNA in a $35 billion deal — a 31 percent premium at the time the deal was unveiled.
Washington Mutual, the nation’s largest thrift, offered on June 6 to pay the equivalent of 0.45 of its shares for each Providian share, with 11 percent of the total payment being made in cash. Based on the stock’s closing price ahead of the deal’s announcement, the acquisition, valued at $6.5 billion, reflected a 4 percent premium for Providian shareholders. Based on Friday’s closing price for Washington Mutual shares, the deal values Providian shares at $19.12, slightly above their closing price Friday of $18.90.
“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,” Putnam said in a statement. “By accepting a price well below the fair value of the Providian common stock, Putnam believes the merger would transfer significant value to Washington Mutual’s existing shareholders, at the direct expense of Providian’s shareholders.”
Providian has set a shareholders meeting on Aug. 31 to vote on the proposed merger, which it hopes to close sometime in the fourth quarter. If approved, Providian would add its 9.4 million credit card accounts to the Seattle-based bank’s 9.2 million debit cards and 11.7 million retail and mortgage customers.