American Residential Mortgage said Monday that it has hired Salomon Brothers to advise it "on strategic alternatives," including a possible sale of the company.
The announcement is the latest sign that consolidation may be accelerating in the mortgage industry. With loan volume slumping, several mortgage companies already have been sold this year and others are on the auction block.
Industry insiders said that North American Mortgage, another major mortgage bank, has hired Morgan Stanley to explore a possible sale. North American declined to comment.
Interest Is Reported
Salomon said Am Res had received "several preliminary indications of interest." The identity of the interested parties was not disclosed.
"Our goal is to effect a strategic alliance that would augment our capabilities with the strength of a leading financial services institution," said John M. Robbins Jr., chairman.
American Residential's stock price rose 50 cents a share Monday, to $17.75, before trading was halted for dissemination of the announcement. Trading did not reopen.
American Residential, based in La Jolla, Calif., has been feeling the pinch of industrywide problems, such as declining originations. It also has suffered some setbacks of its own.
For example, a portfolio of adjustable-rate mortgages that the company was holding for a real estate investment trust went sour earlier this year, when rising interest rates eroded the value of the mortgages after the REIT canceled its planned public offering.
Much Talk of Takeover
North American, based in Santa Rosa, Calif., has often been the subject of takeover talk this year.
Over two days last week, the company's stock jumped $2.50, to $23.625, after company chairman John Farrell indicated to financial journalist Dan Dorfman that the company was for sale.
However, Terrance G. Hodel, North American's president, suggested to the American Banker that Mr. Farrell's comments had been misconstrued.
"We are not for sale," Mr. Hodel said. "But we have a responsibility to our shareholders" and would be obliged to consider serious bids, he added.
Mr. Hodel declined to say if the company had hired Morgan Stanley.
Gareth Plank, an analyst with Mabon Securities, thinks that if North American has done so, it is probably because it wants to be prepared if offers come.
Other market watchers, however, maintained that North American may be actively exploring a sale.
In fact, North American has been under pressure from some shareholders. An investment fund that controls more than 10% of North American's stock recently announced that it had hired its own investment bank to value the company.
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