Beneficial Corp., a worldwide giant in consumer finance, may be a takeover target.

Lenders who specialize in customers with tainted credit histories have been beefing up by buying smaller competitors to realize cost efficiencies. Now, observers say, the industry will start to see several of the jumbo finance companies merge-and one securities analyst has pegged No. 3 Beneficial as the next likely target.

Beneficial makes mortgage and personal loans to customers who do not qualify for bank loans. It has a valuable branch network and high but trimmable costs, notes Michael Durante, analyst with Prudential Securities.

Associates First Capital Corp. is one of the most logical buyers, he said.

Beneficial, based in Wilmington, Del., is vulnerable to a bid because it is "less efficiently run than Associates or Household," said Mr. Durante. "The company trades at a significant discount compared to its competitors," he said.

Beneficial has just under 1,000 branches nationwide, more than any of its competitors, but just $17 billion in assets.

Household International and Associates both have nearly $50 billion.

A merger between Beneficial and Associates would produce a company roughly the size of KeyCorp, the Cleveland bank holding company.

Finn Caspersen, Beneficial's notoriously outspoken and individualistic chief executive, said the company is not on the block, but he didn't dismiss the idea of selling it in the future.

"We're realists," he said. "We're not going to adopt a burnt-fields strategy and destroy value. At some juncture, any rational shareholder would consider an offer."

But right now Mr. Caspersen is looking to build 30% to 40% over the next three or four years and add 5% more branches a year.

Associates has "been in acquisition mode in the past," said senior vice president Fred Stern, but he would not discuss plans.

A potential acquirer would have to price Beneficial at or above $100 a share before Mr. Caspersen would think about a deal, Mr. Durante speculated. The stock was at $63.875 Friday afternoon.

A savvy acquirer might be able to pay a premium and still make a hefty profit, Mr. Durante said. An acquirer could pay a premium of 15% to 20% for the company and still make a profit by initiating a cost-cutting plan, he said.

Observers note that nonbank lending is ripe for mergers. The consumer finance sector "hasn't yet seen the same consolidation as traditional banking, securities, or mortgage banking," said Cynthia Glassman, a senior manager at Ernst & Young.

Companies are now realizing the advantages of scale, said a spokeswoman for Advanta Corp., Spring House, Pa. "There is tremendous leverage to be gained from one brand name and centralized servicing," she said.

A sectorwide stock slide in the past few months has made nonbank finance companies more affordable. And last week the No. 2 player, Household International, announced it planned to acquire Transamerica Corp.'s consumer finance division, stimulating talk of more mergers between big players.

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