Investors hunting for a merger candidate Friday turned their attention back to Wells Fargo & Co. after another California institution, Bay View Capital Corp., nixed rumors that it is about to sell.
Shares of Wells Fargo spiked $10.75, to $363.25. Much of the rise came around 12:30 p.m., moments after Bay View, a San Mateo-based thrift company, quashed speculation that it was negotiating to sell to Washington Mutual Inc., Seattle.
Bay View's stock, which had been up more than 20% since Wednesday, tumbled $1.625, to $32.25.
"Bay View Capital Corp. is not currently in discussions with any organization regarding the acquisition of Bay View Capital Corp.," said a press release. "Bay View Capital Corp. is, however, in discussions concerning its potential acquisition of a nonbank organization."
With $5.3 billion of assets, Bay View is much smaller than the recent acquisitions that made Washington Mutual the largest of all thrifts. In March, Washington Mutual agreed to buy the $54.5 billion-asset H.F. Ahmanson & Co. of Irwindale, Calif. Eight months earlier it bought Great Western Financial Corp., California's second-largest thrift at the time.
The rampant consolidation has left Bay View as the state's fifth-largest thrift company. Moreover, it has a strong presence in the vibrant San Francisco and Silicon Valley areas.
Investors also suspect that Washington Mutual's expansion-minded chief executive officer, Kerry K. Killinger, is again on the prowl. The speculation coincides with a belief that Bay View needs to do something quickly to turn around its sluggish earnings.
Bay View's first-quarter profit of 24 cents per diluted share was 15 cents down from a year earlier. The return on equity was a meager 7.24%. NationsBanc Montgomery Securities analyst Caren E. Mayer recently cut her 1998 earnings estimate by 10 cents, to $1.65 a share.
On May 13 the investor James J. Cramer disclosed a 5.5% stake, or 1.125 million shares, in Bay View. Another noted investor, Michael Price, had owned an 8.6% stake in the company, but sold half of that in 1996 and is said to have since sold most of the rest.
Bay View Capital operates 56 branches in the San Francisco area under the name Bay View Bank. But the company has been frustrated lately in its attempts to grow through acquisition.
Bay View lost a bid for Sumitomo Bank of California, people close to the thrift say, even though it was said to have offered more than the eventual buyer, Zions Bancorp. of Salt Lake City.
As for Wells Fargo, Friday's activity in the stock did not appear to be based on much more than a new round of rumors about a possible combination with U.S. Bancorp of Minneapolis.
Salomon Smith Barney banking analyst Henry C. Dickson issued a report praising Wells Fargo and raising his target price for the stock to $400 per share.
According to a trader flooded with buy orders for Wells Fargo, "the (takeover) sentiment is back."
Fueling those feelings may be the statement in American Banker last week by U.S. Bancorp CEO John F. Grundhofer that the company had just about wrapped up its integration of the old U.S. Bancorp in Portland, Ore. (Mr. Grundhofer's company, First Bank System, adopted its acquiree's name.) He said he is not inclined to sit on the sidelines if an appealing opportunity develops.
U.S. Bancorp was off $0.1875 Friday, to $39.625.
Several analysts remained skeptical that a deal was in the works. They pointed to the so-called Friday effect, in which shares of takeover targets tend to rise on anticipation of a Monday merger announcement, warranted or not.
Lawrence W. Cohn, research director at Ryan, Beck & Co., Livingston, N.J., didn't rule it out. "There is no question that U.S. Bancorp wants to stretch down the Pacific Northwest into California," he said.
Both U.S. Bancorp and Wells Fargo declined on Friday to discuss the price movements or to link them to a potential deal.
