Old Kent Share Price Rises In Wake of an Acquisition
Solid fundamentals apparently drove last week's nearly 7% run-up in the stock price of Old Kent Financial Corp., analysts said.
The Michigan bank holding company once was the subject of frenzied takeover speculation, but that no longer seems to be the case.
Old Kent closed Friday at $31.25 a share. Most of the week's gain came Wednesday, but the stock price continued to edge up through the rest of the week in unusually active trading.
Old Kent was unaware of any particular reason for the upswing.
The company's most recent public announcement was July 26, when it said it had agreed to buy Hasten Bancorp of Indianapolis, making good on its previously stated intention to expand into Indiana. The company has similar intentions in Wisconsin but has made no foray yet into that state.
Martin Allen, head of investor relations at Old Kent, said last week's trading appeared to be well distributed, with no large blocks changing hands.
Analysts were unaware of anything that might have triggered the activity last week, though they said the company deserved to trade at a higher multiple to earnings and book value, based on the quality of its management and assets.
Investors' Attention Strays
Michael Milunovich at Robert W. Baird & Co. said he thinks investors are moving off such high-fliers as Fifth Third Bancorp and Banc One Corp. and looking at stocks such as Old Kent, which have been relatively overlooked.
Before last week, Old Kent stock was comparatively cheap, commented Denis Laplante of Fox-Pitt Kelton Inc. However, he said, with last week's gain, Old Kent is now approaching a fair valuation.
Until a year or so ago, Old Kent traded at a premium to other Michigan banks because of speculation that it was a takeover candidate.
Banc One, the Columbus, Ohio, superregional, had been considered the most likely suitor, but the takeover speculation largely played itself out. "I think they'd like Old Kent," said Mr. Milunovich, but Banc One has other priorities right now, he added.
Banc One's New Interest
Indeed, Banc One confirmed last week that it is a potential bidder for Ameritrust Corp. of Cleveland.
After last week's gains, Old Kent was trading at about nine times projected 1992 earnings and 1.3 times its book value, said Joe Duwan at Keefe, Bruyette & Woods Inc. That's about in line with most other midwestern regionals, he said.
As a result, the rally in Old Kent may have run its course, at least for now.
Shares of Security Pacific Corp. and First Interstate Bancorp fell sharply after profit forecasts for the Los Angeles banking companies were slashed by an analyst. Other West Coast bank stocks also declined.
Near the close of trading, Security Pacific was off $1.125, to $22.875, and First Interstate had slipped 62.5 cents, to $27.75.
Donald K. Crowley of Keefe, Bruyette & Woods Inc. reportedly cut his 1991 profit forecast for Security Pacific to $2 per share, from $2.40, and his 1992 figures to $2.30, from $3.15.
His 1991 estimate for First Interstate was sliced to 60 cents, from 85 cents, and next year's, to $2.80, from $3.40, said market watchers. Mr. Crowley was not available for comment.
PHOTO : Basic Prosperity Price per common share of Old Kent