Irvine-based Westcorp said Tuesday it’s in talks about a possible “business combination” as its own plan to restructure the finance company is stalled at the hands of regulators.
Westcorp didn’t offer many details but said it has retained Credit Suisse First Boston as an adviser.
Earlier Tuesday, the Wall Street Journal and other media reported that Westcorp’s WFS Financial Inc. could be up for sale to Wachovia Corp. or other potential buyers.
Auto financier WFS, which is 85% owned by Westcorp through its Western Financial Bank, has a market value of $2.8 billion after a 15% runup on Tuesday.
WFS makes and services auto loans through some 8,000 auto dealers. The company also packages loans and sells them as bonds to Wall Street.
A deal could be Westcorp’s plan B.
For the past year, Westcorp has been trying to reorganize as a bank holding company to allow more flexibility in how its operates. Part of the plan includes buying the remaining 15% of WFS for about $2.6 billion,a 10% premium before Tuesday’s runup.
Westcorp has gained some approvals for the restructuring but has seen the plan delayed by the Federal Reserve.
In a story in the Aug. 22 edition of the Business Journal, analysts and others speculated that a sale of WFS or all of Westcorp could be in the works.
The auto finance sector could be ripe for consolidation after other big moves by banks into credit cards, analysts said.
Bank of America made a move into auto finance last month with a deal to buy $55 billion worth of auto loans from General Motors Acceptance Corp.
“There is nowhere else for banks to grow,” said Jason Stewart, who recently left as an analyst with Friedman Billings, Ramsey & Co. to join a hedge fund in Virginia.
