Household International Inc.'s projection that it could wring $450 million in cost savings from its $8.6 billion purchase of Beneficial Corp. was greeted with skepticism when the deal was announced.
But 12 months later, after eliminating 1,000 employees and 250 offices, taking $1 billion in merger charges, and placating scores of highly disgruntled Beneficial employees, Household is getting kudos from analysts and investors.
In the past month, two analysts have initiated coverage of the company with positive ratings.
Household's stock price is up more than 25% since late February and has nearly doubled from an early-October low of $26.75.
"The company is delivering on what it promised," said Joel J. Houck, an A.G. Edwards analyst who reiterated his March 3 "buy/aggressive" rating on Household on March 29.
"On the cost side, they've done everything they said they would, and more," Mr. Houck said. He put a target price of $52 on Household in early March and estimated that the company could go for as much as $60 a share if it was acquired.
On April 5, Donaldson, Lufkin & Jenrette analyst Moshe A. Orenbuch initiated coverage with an "outperform" rating.
Mr. Houck attributes much of Household's success to its chief executive, William Aldinger. He has "put Household on a rock-solid foundation" since joining the company in 1994, Mr. Houck said.
Mr. Aldinger received a nearly 30% increase in compensation in 1998, according to a proxy filing with the Securities and Exchange Commission. The increase brought his 1998 compensation to just over $3.4 million.
On March 9, Household said it would repurchase $2 billion in stock, or about 10% of its outstanding common shares.
The corporate integration is complete except for combining the finance companies' United Kingdom and private label operations, a Household spokesman said.
Now Household is emphasizing cross-selling, he said. For example, it will be offering credit cards to customers who secure home equity loans through its branches, he said, and home equity loans to credit card customers.
The company is also working with Renaissance Holdings Inc. to develop a subprime credit card strategy, the spokesman said.
Since the merger, Household has eliminated about 250 offices-fewer than its original prediction of 300 offices, but more than the 200 figure it quoted later to critical community activists.