Providian shareholders approve sale to WaMu

Providian Financial stockholders yesterday approved the company's acquisition by Washington Mutual, despite one major Providian shareholder opposing the merger and two advisory firms recommending shareholders reject it.

Of the shares that were voted, 83 percent endorsed the transaction, which is scheduled to close Oct. 1.

Such votes are often rubber-stamp events at which shareholders celebrate their increasing share value. But in this case, WaMu is paying a premium of just 4.2 percent above Providian's stock price before the $6.45 billion deal was announced.

That premium paled next to the roughly 30 percent premium that MBNA commanded from Bank of America in late June.

MBNA is the nation's third-largest credit-card company; Providian ranks ninth, according to June 30 data compiled by the Nilson Report. One of Providian's largest shareholders, Putnam Investments, took the unusual step of publicly announcing that it would vote against the acquisition by WaMu, saying the price was inadequate.

And two firms that advise shareholders how to vote recommended Providian shareholders oppose the deal. Two other advisory firms recommended stockholders approve it.

Despite an unusually lively run-up to the vote, it was lopsided. About 81 percent of Providian's total shares were voted, and 83 percent of the voted shares endorsed the merger.

"I guess you'd have to say shareholders were very much for this transaction," said Chris Blum, a bank analyst at Edward Jones in St. Louis.

The acquisition makes sense for WaMu besides getting Providian at a reasonable price.

Strategically, the Seattle-based thrift will be able to offer its own credit cards to existing customers. And it will have the opportunity to sell Providian cardholders on WaMu mortgages and other financial products, Blum said.

The chief executive of one proxy-advisory firm recommending that Providian shareholders oppose the merger said last week that he expected the deal to be approved.

Greg Taxin at Glass, Lewis & Co. said the big question was how many shareholders would forgo the cash and WaMu stock being offered — the equivalent of 0.45 WaMu shares for each Providian share — and instead ask a court to determine how much their Providian shares are worth.

Providian spokesman Alan Elias said a "handful" of stockholders, representing less than 1 percent of the company's shares, told the company they intend to seek a court appraisal. He would not disclose their names.

Their decision does not hold up the merger.

WaMu shares rose 44 cents yesterday to close at $41.58. Providian shares were up 24 cents to $18.60.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com