The buzz in investment circles is that Fulton Financial Corp. of Lancaster, Pa., may soon receive a buyout offer that is too good to refuse.
The $11 billion-asset company would be a good catch for a larger one looking for a sizable foothold or bigger presence in Pennsylvania and New Jersey.
Fulton might be for sale because its longtime chief executive officer will retire soon, as is widely expected, the investment firm Ryan Beck & Co. Inc. speculated in a recent research report.
But at the moment the company is acting more like a buyer than a seller. It has just closed a deal in New Jersey, this week it announced another there, and executives at Fulton say it is scouting as far south as North Carolina for further expansion.
Rufus A. Fulton Jr. (the company was not named for his family) has been its CEO since 1993 and its chairman since 1999. He declined an interview request but said Tuesday in an e-mail that the board "believes the current return provided to our shareholders is a good one, and that our remaining an independent institution is beneficial to investors."
He refused to exclude the possibility of a sale, though.
"That's not to say that next week or next year, the board members won't change their minds," wrote Mr. Fulton, who will turn 65 in October.
Indeed, with the pace of mergers and acquisitions expected to accelerate in 2005, observers expect several potential acquirers to take a hard look at Fulton.
Fulton owns 13 banks with 224 branches in Pennsylvania, New Jersey, Delaware, Maryland, and Virginia. It is highly profitable, has solid asset quality, and operates in some of the most desirable markets in the country.
Late Tuesday the company announced that it would buy the $475 million-asset SVB Financial Services Inc. of Somerville, N.J., for $89 million in stock and cash. That deal would move Fulton into Middlesex and Somerset counties in central New Jersey, among the most affluent in the country.
In late December, Fulton bought the $486 million-asset First Washington FinancialCorp in Windsor, N.J., moving thereby into three other central New Jersey counties.
Anyone considering a bank acquisition in the Middle Atlantic states should consider Fulton, said Jacqueline Reeves, a managing director at BankAtlantic Bancorp's Ryan Beck. "They've got an attractive franchise in an alluring marketplace that many banks have got to be coveting."
Ms. Reeves said that Banknorth Group Inc. of Portland, Maine, or Royal Bank of Scotland's Citizens Financial Group Inc. of Providence, R.I., could make runs at Fulton. Both are looking to expand in the region, she said.
Andy Stapp, an analyst for Cohen Bros. & Co. in Philadelphia said that if BB&T Corp. in Winston-Salem, N.C., decides to move north of the Mason-Dixon line it might well consider Fulton.
There are signs that investors have bought into the Fulton-is-a-target theory. For most of last year its stock hovered around $20, and the number of shares traded fluctuated between 100,000 and 150,000 shares a day. But the price began rising in mid-August and hit a high of $23.49 on Dec. 30 before settling back consistently in the $22 range.
Fulton shares were trading at $22.07 late Thursday.
Volume has also picked up substantially in recent weeks, possibly because of Ryan Beck's report, which was cited in the Dec. 27 issue of Business Week. Trading volume has topped 200,000 in all but two days this year; it soared to 695,000 on Jan. 4.
Takeover speculation could be fueling the activity, though Fulton's aggressive buyback policy may also explain it, Mr. Stapp said.
Some of the speculation about Fulton, he said, can be traced back to late 2002, when its earnings growth began to slow. Its earnings declined for three straight quarters in 2003, and did not rebound until early last year.
Richard D. Weiss, an analyst for Janney, Montgomery, Scott LLC in Philadelphia, called Fulton's recent results "excellent." Its profit in the third quarter of 2004 was a record $39 million, up 14% from a year earlier.
"It's the quality of the earnings and the condition of their balance sheet, too," he said. "They have plenty of capital, their asset quality is pristine and they don't have a lot of leverage."
Noting the retirement rumors about Mr. Fulton, Mr. Weiss acknowledged that corporate succession issues sometimes trigger sales. But he said he expects no transition problem at Fulton, which identified president and chief operating officer R. Scott Smith as Mr. Fulton's likely successor more than a year ago.
Laura J. Wakely, a spokeswoman for Fulton, said that its executives have traditionally retired at 65 but that the company has no formal mandatory retirement policy. Mr. Fulton has not announced his plans, she said.
Mr. Weiss said he doubts that Mr. Fulton's departure would trigger a decision to sell the company. "They've got a succession plan in place, so they don't need to sell," he said. "Anyway, Rufus isn't the type of executive who thinks, 'I am the bank.' "
Mr. Stapp said: "They execute well, they've got an efficient operation, and they're not struggling. If I were a betting man, I'd bet against a sale."
