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EXHIBIT 11
[MERRILL LYNCH LOGO] Investment Banking Group
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281-1325
212 449 1000
May 19, 1997
Board of Directors
Great Western Financial Corporation
9200 Oakdale Avenue
Chatsworth, CA 91311
Members of the Board:
Washington Mutual, Inc. ("Washington Mutual") and Great Western Financial
Corporation ("Great Western") have entered into an Agreement and Plan of Merger,
dated March 5, 1997 (the "Agreement"), pursuant to which Great Western will be
merged with and into Washington Mutual in a transaction (the "Merger") in which
each outstanding share of Great Western's common stock, par value $1.00 per
share (the "Great Western Shares"), will be converted into the right to receive
0.90 shares (the "Exchange Ratio") of the common stock, no par value, of
Washington Mutual (the "Washington Mutual Shares"), all as set forth more fully
in the Agreement.
You have asked us to confirm, as of the date hereof, whether, in our
opinion, the proposed Exchange Ratio in the Merger is fair to the shareholders
of Great Western from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
1) Reviewed Great Western's Annual Reports on Form 10-K and related
audited financial information for the five fiscal years ended December
31, 1996, and Great Western's Quarterly Report on Form 10-Q and the
related unaudited financial information for the quarterly period ended
March 31, 1997;
2) Reviewed Washington Mutual's Annual Reports on Form 10-K, and related
audited financial information for the three fiscal years ended December
31, 1996 and Annual Report to the FDIC on Form F-2 of Washington Mutual
Savings Bank, predecessor to Washington Mutual for the two years ended
December 31, 1993, and Washington Mutual's Quarterly Report on Form
10-Q and the related unaudited financial information for the quarterly
period ended March 31, 1997;
3) Reviewed the Washington Mutual Registration Statement on Form S-4 dated
March 13, 1997, as amended through May 13, 1997;
4) Reviewed certain financial information, including financial forecasts,
relating to the respective business, earnings, assets, liabilities and
prospects of Great Western and Washington Mutual furnished to us by
senior management of Great Western and Washington Mutual;
5) Conducted certain discussions with members of senior management of
Great Western and Washington Mutual concerning the respective financial
condition, businesses, earnings, assets, liabilities, operations,
regulatory condition, financial forecasts, contingencies and prospects,
of Great Western and Washington Mutual and their respective view as to
the future financial performance of Great Western, Washington Mutual
and the combined entity, as the case may be, following the Merger;
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6) Reviewed the historical market prices and trading activity for the
Great Western Shares and the Washington Mutual Shares and compared them
with that of certain publicly traded companies which we deemed to be
relevant;
7) Compared the respective results of operations of Great Western and
Washington Mutual with those of certain publicly traded companies which
we deemed to be relevant;
8) Compared the proposed financial terms of the Merger as set forth in the
Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
9) Reviewed the amount and timing of the projected cost savings, related
expenses and revenue enhancements expected to result from the Merger
(the "Expected Synergies"), as presented by the senior management of
Washington Mutual;
10) Considered, based upon information provided by the senior management of
Great Western and Washington Mutual, the pro forma impact of the
transaction on the earnings and book value per share, consolidated
capitalization and certain balance sheet and profitability ratios of
Washington Mutual;
11) Reviewed the Agreement and related agreements;
12) Reviewed the H.F. Ahmanson & Company ("Ahmanson") merger proposal and
the subsequently proposed exchange offer (the "Ahmanson Exchange Offer
Proposal") pursuant to which, in each case, each outstanding share of
Great Western would be exchanged for between 1.10 and 1.20 shares of
Ahmanson common stock, as set forth more fully in Ahmanson's
Registration Statement on Form S-4 dated February 18, 1997, as amended
through May 13, 1997;
13) Reviewed certain press releases and filings with the SEC by Great
Western, Washington Mutual and Ahmanson in connection with the Merger
and the Ahmanson exchange ratio and related matters; and
14) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed appropriate.
In preparing our opinion, with your consent we have assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to us by Great Western and Washington Mutual, including that
contemplated in the numbered items above, and we have not assumed responsibility
for independently verifying such information or undertaken an independent
evaluation or appraisal of the assets or liabilities, contingent or otherwise,
of Great Western or Washington Mutual or any of their subsidiaries, nor have we
been furnished any such evaluation or appraisal. We are not experts in the
evaluation of allowances for loan losses and, with your consent, we have not
made an independent evaluation of the adequacy of the allowance for loan losses
of Great Western or Washington Mutual, nor have we reviewed any individual
credit files relating to Washington Mutual or Great Western and, with your
consent, we have assumed that the aggregate allowance for loan losses for each
of Washington Mutual and Great Western is adequate to cover such losses and will
be adequate on a pro forma basis for the combined entity. In addition, we have
not conducted any physical inspection of the properties or facilities of Great
Western or Washington Mutual. With your consent, we have also assumed and relied
upon the senior management of Great Western and Washington Mutual as to the
reasonableness and achievability of the financial forecasts (and the assumptions
and bases therefor) provided to, and discussed with, us. In that regard, we have
assumed and relied with your consent that such forecasts, including without
limitation, financial forecasts, evaluations of contingencies, Expected
Synergies and projections regarding underperforming and non-performing assets,
net charge-offs, adequacy of reserves, and future economic conditions reflect
the best currently available estimates, allocations and judgments of the senior
management of Great Western and Washington Mutual as to the future financial
performance of Great Western, Washington Mutual or the combined entity, as the
case may be. Our opinion is predicated on the Merger receiving the tax and
accounting treatment contemplated in the Agreement. Our
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opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Our opinion has been rendered without regard to the necessity for, or level
of, any restrictions, obligations, undertakings or divestitures which may be
imposed or required in the course of obtaining regulatory approval for the
Merger.
We have been retained by the Board of Directors of Great Western as an
independent contractor to act as financial advisor to Great Western with respect
to the Merger and will receive a fee for our services. We have, in the past,
provided financial advisory and financing services to Great Western and
Washington Mutual and received customary fees for the rendering of such
services, including acting as lead underwriter for a 14.6 million share
secondary public offering of Washington Mutual common stock in January 1997. In
addition, in the ordinary course of our securities business, we may actively
trade debt and/or equity securities of Great Western and Washington Mutual and
their respective affiliates for our own account and the accounts of our
customers, and we therefore may from time to time hold a long or short position
in such securities. In addition, certain affiliates of Merrill Lynch & Co. act
as investment advisors to publicly held mutual funds which owned, as of May 16,
1997, approximately 4.93 million shares of Great Western's common stock and
approximately 0.06 million shares of Washington Mutual's common stock.
Our opinion is directed to the Board of Directors of Great Western and does
not constitute a recommendation to any shareholder of Great Western as to how
such shareholder should vote at any shareholder meeting of Great Western held in
connection with the Merger, nor does our opinion constitute a recommendation as
to how such shareholders should respond to the Ahmanson Exchange Offer Proposal.
Our opinion is directed only to the proposed Exchange Ratio and is for the
confidential use of the Board of Directors of Great Western and may not be
reproduced, summarized, described or referred to or given to any other person
without our consent.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Exchange Ratio in the Merger is fair to the shareholders of Great
Western from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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