Fleet Financial Group, which owns 81% of Fleet Mortgage Group, has offered to buy the remaining stock at $20 a share. The purchase, if completed, would cost Fleet about $190 million.
The offer, announced late Wednesday, was far from surprising. Securities analysts have been saying for months that such a move would make sense.
Analyst Tom O'Donnell of Smith Barney Inc., New York, wrote Oct. 25: "Because Fleet Mortgage may be undervalued by the public equity markets when compared to the company's private market value, we would not be surprised to see Fleet Financial buy back the outstanding 19% stake in the company."
He added that Fleet would like to run the mortgage company from a long-term perspective and be less tied to quarterly earnings considerations. In its announcement, Fleet said the deal would not dilute the parent's earnings.
Fleet Mortgage will be merged with Plaza Home Mortgage Corp., which the parent recently acquired.
The buyout will relieve Fleet of having to deal with minority shareholders who have often complained about the unit's spending policies.
Fleet said approval by a majority of the public shareholders would be required, but this did not appear to be an obstacle. Some large holders of Fleet Mortgage have already gone on record as favoring the deal.
Orrin S. Kramer, general partner of Boston Provident Partners, a New Jersey-based hedge fund, said, "Fleet Mortgage shareholders should understand that, in the current market environment, they are getting excellent value."
He added that many recent buyers of Fleet Mortgage shares may well have bought in with the intention of selling.
Harry V. Keefe Jr., chairman of Keefe Managers Inc. and the biggest holder of Fleet Mortgage, also said he would accept the offer.
The stock closed Wednesday at $17.375 a share. It had climbed $2.375, to $19.75, by midday Thursday in heavy trading.
