Speculation that Republic New York Corp. is about to be sold to the Swiss banking giant UBS AG drove Republic's shares up 13.7% on Friday, accelerating a sharp monthlong increase.
Sources predicted that UBS would pay $75 a share, which would be about 37% higher than the $47 price that prevailed in early April. At Friday's close, shares of the $50.5 billion-asset company were at $70, up $8.4375.
UBS' primary strategy would be to acquire Republic's private banking operations, analysts said, adding that they expected UBS to sell Republic's branches. Republic had 94 branches and $32.7 billion of deposits on March 31.
Among potential buyers of the branches, they said, are HSBC Bank USA and ABN Amro Holdings, which is reported to be buying eight Bank of America Corp. branches in Asia.
Spokesmen for UBS and Republic declined to comment on the speculation.
Takeover rumors concerning Republic have swirled through the markets over the last several months, causing its stock to gyrate wildly.
On Friday trading in Republic's shares was delayed at the market's opening because high demand created a trading imbalance.
Activity in Republic's options has been particularly fierce. Option volatility reached a 52-week high Thursday, which often signals a merger announcement, said strategist Paul G. Foster of 101WallStreet.com. Republic's options usually have a volatility of 35, he said, but on Thursday they reached 58.
Other market experts said the odds that Republic will be bought are high.
"People are saying the company is gone," said Carla D'Arista, a bank analyst at Friedman Billings Ramsey & Co. of Arlington, Va. "It makes sense that UBS would want to buy the company for its private banking and then sell off its branches."
In the third quarter, Republic shares were pummelled after losses from its investment in Russian bonds. Since then, the stock has rebounded as the company scaled back its foreign exposure, cut staff, and refocused its energies on the jewel of their enterprise - private banking.
But those third-quarter losses made the company more vulnerable to a takeover. "The market took its cue from Republic's recent stumble," Ms. D'Arista said. "And you can see why - look what happened to BankBoston and Bankers Trust."
"I would not be surprised" if UBS bought Republic, said William P. Boardman, senior executive vice president and head of mergers and acquisitions with Bank One Corp. "This sounds similar to what State Street is doing. Companies are rationalizing their businesses."
On Thursday, State Street Corp., which specializes in processing and money management, said it would sell the remnants of its commercial banking business to Citizens Financial Group, a unit of Royal Bank of Scotland Group PLC.
Similarly, UBS is shifting its focus to asset management, said Susanne Borer, a bank analyst with Vontobel Securities AG of Zurich.
The company "told analysts in January that UBS wants to gain critical mass in its private banking activities and that the U.S. market is a prime target. Republic's wealth management operations would fit snugly with UBS' strong international position in that business, analysts said.
In Friday's Financial Times, Marcel Ospel, UBS' chief executive, said UBS is looking to expand its investment banking and asset management operations.
Analysts said the movement in Republic's stock was strong evidence that a takeover was at hand. "The market doesn't usually make mistakes like that," said Stephen Biggar, a banking analyst with S&P Equity Group. "We could hear something soon."
Analysts said Republic appeared to be welcoming a sale by raising its profile in the investment community. "They've been making efforts to get their story out," Mr. Biggar said. "That could include being shopped around."