Timing of Golden State deal proves perfect for Perelman. (Investments & Finance).

Citigroup Inc.'s agreement to buy Golden State Bancorp for cash and stock valued at $5.8 billion came at a rather opportune time for Ronald Perelman the thrift's controlling shareholder.

Perelman has raised $426.4 million since December 2000, through borrowings secured by about half his stake, according to filings made with the Securities and Exchange Commission. He obtained the money from Credit Suisse First Boston by agreeing to sell shares or pay an equivalent amount of cash at a later date.

Fifteen of the so-called forward sales have been arranged. The first two come due in December - about the same time Citigroup plans to complete its purchase of Golden State, the second-largest U.S. thrift.

Terms of the sales suggest Perelman, the billionaire chairman of Revlon Inc., will have to share some of the rewards from the takeover with Credit Suisse. When one considers how he's fared the past few years, though, that may not count for much.

Revlon's stock price has fallen 91 percent since April 1998. Sunbeam Corp. shares that he received four years ago in a takeover are almost worthless. His April 2001 sale of a stake in Woodland Hills-based Panavision Inc. to M&F Worldwide Corp., another company that he controls, led to lawsuits he has yet to settle.

Perelman has fared relatively welt in the thrift industry, which he entered in 1988 by purchasing five failed savings and loans in Texas from the federal government.

Through the next decade, he parlayed that investment into ownership of the fourth-largest U.S. thrift, California Federal Bank. Perelman had 80 percent of the stock; the rest belonged to Gerald Ford, its chairman and chief executive.

Golden State came under Perelman's control in September 1998, when the thrift and California Federal completed a "reverse merger." The $1.9 billion transaction gave him and Ford a 45 percent stake in the combined company. Ford became chairman and chief executive, and still serves in those positions.

Shares of the San Francisco-based company, whose Cal Fed unit ranks second only to Washington Mutual among U.S. thrifts, gained 95 percent between the completion date of the acquisition and the disclosure of Citigroup's proposed purchase.

Perelman started out with a 32 percent stake in Golden State. His holding reached 37 percent in December 1999 because the thrift repurchased shares from other investors and paid out more stock to him and Ford in connection with the takeover.

In May 2000, Golden State made another acquisition-related stock payment. Perelman received 3.9 million shares -- and sold them all a week later for $16.25 each, according to SEC filings.

The $63.5 million sale was followed three months later by another one that raised $48 million. Perelman sold 2.6 million shares at $18.81 apiece. That left him with 42.9 million shares, or 32 percent of the stock outstanding.

Since then, his stake hasn't changed. He just agreed to vote all the shares in favor of Citigroup's offer. The world's largest financial services company plans to pay about $16.40 in cash and 0.5234 share for each share of Golden State, whose holders will have the right to choose either cash or stock within limits.

Perelman could make that pledge because he chose to raise money through the forward-sale contracts with Credit Suisse First Boston. The agreements effectively enabled Perelman to borrow against his Golden State stock, rather than just selling.

Each contract specifies the number of shares to be sold, sale price and timing -- 18 months or two years, depending on the contract -- and give him the option of repaying cash instead.

The first, and largest, of the 15 agreements can serve as an illustration. In December 2000, Perelman arranged to sell as many as 3 million shares and received $65.4 million. Terms of the two-year contract included a minimum price of $26.50 a share, and a maximum of $31.80, for the future sale.

Perelman would only have to pay the 3 million shares, or the cash equivalent, if Golden State traded for less than $26.50 when the contract matured this December.

If it was between the lower and upper limit, the payment would total $79.5 million, equivalent to the stake's value at the minimum price. It would exceed that amount if the market price was above the maximum.

The maximum price in eight of the contracts is less than what Citigroup offered: $40.09 for each share of Golden State, based on the proposed mix of cash and stock.

Under terms of the contracts, Perelman would be obligated to pay additional amounts to Credit Suisse as a result. The payment on the first contract, for example, would total $104.4 million. That's $24.9 million more than the specified sale price.

Then again, investors in other companies tied to Perelman might wish they had that kind of problem. Revlon's stock, which peaked at $56.38 four years ago, recently closed at $5.28.

The plunge reflects falling sales and mounting losses. Sunbeam collapsed after buying his stake in Coleman Co., a maker of camping gear, for cash and stock. Sunbeam buried itself under $1.7 billion of takeover-related debt and filed for bankruptcy in February 2001.

Finally, there's M&F Worldwide. The producer of licorice extract bought Perelman's stake in Panavision, a movie-camera maker, for $128 million - four times its market price. A Delaware judge has rejected a proposed $14.8 million settlement of lawsuits related to the deal.

Take all that into account, and the timing of Citigroup's purchase of Golden State looks even more auspicious.

Contributing columnist Benjamin Mark Cole is off this week.

Golden State Bancorp

Shares of Ronald Perelman's thrift have risen steadily.

June 5, 2001  $63.85
June 5, 2002  $69.79

Note: Table made from line graph