Government Services Savings and Loan Association of Bethesda agreed yesterday to become an affiliate of Chevy Chase Savings and Loan Association after abruptly ending merger talks with a Virginia real estate company.
The merger, which requires the approval by Government Services' stockholders and Maryland regulators, would combine two of the largest state-chartered S&Ls in Maryland into one institution with assets of more than $1.1 billion.
A.R.M. Boyle, Government Services' president, said directors of his association agreed to merge with Chevy Chase after concluding that its offer of $10 a share was "substantially better" than the $6 a share offered last week by Equity Programs Investment Corp. (EPIC) of Falls Church.
Government Services will retain its present management, company name and headquarters location, if the merger is completed as expected late next month.
The planned merger was announced by Boyle and Chevy Chase President B. Francis Saul II, who also heads the B.F. Saul Real Estate Investment Trust and a string of real estate development and management companies.
The decision to merge Chevy Chase and Government Services came during a meeting of directors, which followed an announcement by EPIC Monday night that Government Services had declined to sign a definitive merger agreement.
An agreement in principle announced last week called for EPIC to merge Government Services into an affiliate of EPIC.
The agreement with EPIC, a diversified real estate company, called for EPIC to pay about $5.25 million for Government Services stock. In addition, stockholders would have received at least $3 a share from the sale last year of the S&L's property in Bethesda.
Government Services spurned the offer by EPIC after it was approached by other suitors, officials of the S&L said. "Basically Chevy Chase came after us and offered a better consideration for our stockholders," said Boyle, insisting offers by Chevy Chase and other unnamed suitors were "unsolicited by us."
EPIC officials could not be reached for comment on yesterday's development. EPIC's president had indicated in a statement Monday night that he expected Government Services to call off the deal with his company.
Although Government Services officials deny there were attempts to find another merger partner after reaching a preliminary agreement with EPIC, the S&L had been looking for a merger partner for several months. Why other suitors suddenly became interested after Government Services announced its merger with EPIC is unclear. Boyle refused to identify the other companies that had expressed interest in a merger.
Government Services, like many S&Ls, has been in financial trouble. It reported a loss of $3.7 million ($4.36 share) for the fiscal year that ended March 31.
A dispute over how to reverse the losses enabled dissident stockholders to win four seats on the association's board last year and spurred the search for a merger partner.
Government Services, which has assets of approximately $400 million, is a state-chartered stock association. Chevy Chase, although state-chartered, is a mutual association and is not required to report its earnings results. It has assets of more than $750 million.
The voluntary merger of the two institutions will further consolidate the industry in metropolitan Washington. The affiliation will improve the ability of both institutions to provide a competitive range of services, said Boyle and Chevy Chase's president, B. Francis Saul II.