SunTrust Banks Inc. chairman and chief executive L. Phillip Humann has insisted that his company is not for sale, but some investors are still asking what it would take to change his mind.
Ever since Bank of America Corp. struck a deal in late October to buy FleetBoston Financial Corp. for a 43% premium, some investors have wondered whether Mr. Humann might be tempted by a similarly generous offer, as an attendee at the BancAnalysts Association of Boston conference asked last Friday.
Mr. Humann's answer raised eyebrows. He said he would not take a big premium deal to his board to consider.
"No, and it's very simple," he said. "It's not that kind of a premium. It's that kind of a premium on Sunday night. By Monday morning at 10 o'clock or noon, a lot of it has vanished."
Indeed, Bank of America's $47 billion offer for FleetBoston lost about 10% of its value the day it was announced, as unhappy shareholders sold off stock in the Charlotte company. The premium to Fleet's shares, meanwhile, shrank by more than one-third, to about 28%. B of A's shares have since regained some of their value, and the stock swap is now worth a 32% premium.
Still, by Tuesday, SunTrust's spokesman was working to clarify Mr. Humann's remarks. He acknowledged that the CEO had said earlier that the Atlanta company's board would have to discuss any offer.
The question of whether the $127 billion-asset SunTrust might sell itself is coming up more frequently. Like Fleet, it is viewed as a company that has weakened over the past year. Earnings have been lackluster in part because of sluggish revenues, low interest rates, and a miscalculated bet on interest rates that narrowed its profit margin.
Investors, especially those who would favor a sale, have persisted in grilling Mr. Humann for some sign that he might be willing to sell.
His apparent rejection Friday of the idea of a 30%-40% premium jarred a few institutional shareholders, who said they believe he would be obliged to take such an offer to his board.
"It took everybody aback a little bit, being so strong," said Frank Barkocy, the director of research at Keefe Managers LLC in New York. Another buy-side analyst, who did not want his name used, said his "jaw fell to the floor" when he heard Mr. Humann's remarks.
Attempting to massage the statements, SunTrust spokesman Barry Koling said on Tuesday that the company "would never speculate on a hypothetical situation" such as a deal offering a 30%-40% premium. "Mr. Humann has previously been quoted as saying that obviously, there is a point at which [board] discussions would have to be held, but we would never speculate what that point is."
Mr. Humann's remarks indicate he does not see that happening anytime soon.
At an Oct. 29 conference in New York, just two days after the Bank of America-Fleet deal was announced, he said: "Would SunTrust be an attractive [takeover] candidate, given our franchise? Absolutely yes. But we and our board would have to consider if somebody else could maximize this franchise better than we can."
Asked at that conference whether he would consider a big premium offer, he said, "I guess there is a set of circumstances where we would have to have a discussion, but they haven't occurred and I don't think they will."
David Hendler, a credit analyst at CreditSights Inc. in New York, said Mr. Humann may just be biding his time, hoping to turn things around at SunTrust so he can command an even higher sale price. He said Mr. Humann was "gutsy" to suggest that he would not let his board know of a potential high-premium takeover, but it may just be posturing.
"What he is saying is, 'We are in a much better geography and much better circumstances than Fleet was in, so we deserve a higher premium than they got," Mr. Hendler said.
Though SunTrust has been on nearly every observer's list of takeover possibilities this year, much of the talk has been pure speculation. Mr. Humann's argument has been that with the economy on the brink of a recovery, he and his colleagues are in a better position than any acquirer to help revive earnings.
He stuck to that line Friday, saying, "I am very confident that we can achieve for our shareholders independently the same general type of returns that we could get once through a transaction. You've got to keep in mind that there's almost no company out there that if we partnered with would not dilute our growth and demographics."
Many analysts say there is a sense that SunTrust executives and board members would be reluctant to sell in part because SunTrust is the last large independent bank headquartered in Atlanta.
Its board includes business leaders from Atlanta and around the Southeast. It would be "a tough nut to crack for them to sell the primary locally domiciled financial institution," said Jeff Davis, an analyst at First Tennessee National Corp.'s FTN Midwest Research in Nashville.
That could mean that at least for now Mr. Humann will have a chance to guide a turnaround himself. In recent investor presentations he has said he is more optimistic about the company and the economy than he has been in years.
"If our performance improvement stalled and the rest of the industry didn't, then that would be an issue that our board would end up discussing, just naturally and inevitably," he said Friday. "But obviously I don't expect that to happen."
