Shares of Mercantile Bancorp jumped in value Tuesday on speculation that the St. Louis company will be sold.
Veteran analyst Thomas H. Hanley of Warburg Dillon Read named Mercantile his top takeover candidate among U.S. banks and said its stock could fetch as much as $65 a share in a buyout within a year.
Analysts listed ABN Amro, Bank One Corp., Firstar Corp., and U.S. Bancorp as possible suitors.
Shares of Mercantile closed the day at $49.9375, up $3.375, after rising throughout the day on heavy volume.
"Mercantile has amassed an attractive franchise in the lower Midwest, an area in which we believe a number of aspiring superregional and national banks have a gap they would like to fill," Mr. Hanley said in a note to clients.
The banking company's most recent acquisitions have strengthened its presence in Arkansas, Illinois, Iowa, Kansas, and Kentucky.
But despite its size, the $35 billion-asset Mercantile "has yet to approach the industry's upper tier in terms of revenue and earnings growth," Mr. Hanley wrote.
Though management has shifted gears from further purchases to internal growth, "Mercantile's recent acquisitions have continued to slow its financial results and distracted the company from building an effective sales and revenue culture," he said.
With insider ownership of 13.4 million shares, or roughly 10% of the company's outstanding stock, "we expect management to act in the best interest of shareholders in the event of an attractive takeover offer," Mr. Hanley said.
Other analysts agreed with Mr. Hanley's assessment.
Mercantile "is a perennial favorite to be acquired, given their location and product offerings," said Eric Rothmann of Stephens Inc. in Little Rock, Ark.
Moreover, "there's sentiment that Mercantile was unable to truly integrate its acquisitions of Roosevelt Bank Corp. and Mark Twain Bancshares," Mr. Rothmann said.
The activity came as the Standard & Poor's bank index rose 0.97% and other major market measures lost ground. The Dow Jones industrial average lost 0.35%, Nasdaq bank index 0.22%, and S&P 500 0.23%.
Among advancing major bank company stocks, Chase Manhattan Corp. rose $2.125, to $87.9375; Citigroup 50 cents, to $62.50; and J.P. Morgan & Co. $1.4375, to $117.
Among thrifts, Astoria Financial rose 6.25 cents, to $47.6875, and Dime Bancorp 25 cents, to $26.6875. But Washington Mutual shed $1.5625, to $42.4375.