Who will buy WaMu?

Chase seen as a likely suitor for Washington Mutual

Excerpts:

J.P. Morgan Chase & Co. is seen as a likely suitor for Washington Mutual, which is staggering under huge mortgage losses.

Earlier this year, Chase made overtures to WaMu that were rebuffed. The New York bank reportedly offered a stock-swap buyout valued at $8 per share, although other reports put the buyout price at slightly more than $4 per share based on conditions such as contingent payments made based on the performance of WaMu loan portfolio performance. Instead, WaMu went with a $7 billion financing led by TPG Capital, formerly Texas Pacific Group, that valued WaMu at $8.75 per share. TPG structured the deal for its 13 percent stake in WaMu so that it’s made whole if the bank sells for less than it paid within 18 months of the April investment.

WaMu’s shares (NYSE: WM) closed Monday at $2 per share, down 26 percent. Last week, Chase was reportedly in advance talks with WaMu again about a potential deal.

Also fueling speculation on a WaMu sale is the board’s decision this month to oust long-time CEO Kerry Killinger, who resisted selling the thrift. He was replaced by Alan Fishman.

“Killinger was fighting to shrink the balance sheet and keep the bank independent,” Dick Bove, analyst at Ladenburg Thalmann, told the New York Post this week. “By adding Fishman, who’s known as a guy who can get a bank ready for sale, they removed an important obstacle.”

Other banks that have been cited as potential suitors for WaMu include Wells Fargo (NYSE: WFC) and HSBC.

Chase (NYSE: JPM) could be attracted to Washington Mutual’s large branch network in areas where Chase has none. Specifically, key growth markets such as California and Florida. San Francisco bankers have long said it’s only a matter of time before Chase operates branches in the Bay Area.

A sale is looking increasingly likely for Washington Mutual, possibly in a government-assisted transaction.

Comment: I told Kathee on the way into work today ... someone will be buying WaMu.