Nothing gets the attention of investors like mergers and the prospect of more mergers.
The latest example is Boatmen's Bancshares Inc.'s agreement to acquire First Amarillo Bancorp. in a stock swap valued at about $175 million.
The deal was announced late Friday afternoon, and on Monday, the stocks of other takeover candidates were in the spotlight once again. First Amarillo's shares themselves jumped $6.125, to $26.125, a 30% gain.
Investors Bid Up Integra
In midday trading, shares of Integra Financial Corp., Pittsburgh, were up $1.625, to $48.375. With neighbors like Mellon Bank Corp. and PNC Bank Corp., Integra isn't considered a long-term survivor by many money managers and analysts.
Shares of Constellation Bancorp., Elizabeth, N.J., were up, too, in early afternoon trading before backing off slightly on very high volume. The shares closed up 25 cents, to $10.25. New Jersey is considered a fertile hunting ground for both New York and Pennsylvania banks.
UJB Financial Corp., another New Jersey bank, also drew some interest Monday. UJB, Princeton, has long been the subject of takeover rumors, although it has never publicly acknowledged receiving an offer. Its shares rose 37 cents, to $26.625.
Money managers said the reaction to the merger news was muted at other takeover candidates. But that's probably because investors are still digesting earning announcements, not because of a lack of interest.
Devoted to Takeovers
"Investors are doing their homework, trying to figure out which banks are like to be taken over within the next 12 months," said Sam A. Marchese, investment manager at SIFE Trust Fund, Walnut Creek, Calif.
Throughout the prolonged selloff in bank stocks last quarter, money managers and analysts said they prayed for merger news to bring buyers back to the sector.
Investors like mergers for two main reasons.
First, if they guess right and buy shares in a bank that gets a takeover offer, the payoff can be sizable.
Second, mergers are seen as good for the industry. They reduce price competition in markets and give an acquiring bank a revenue stream at a time when revenue growth is a major concern among bankers and investors.
Speculation on 2 Banks
Just the possibility of a merger is enough to get investors to bid up the share prices of banks they believe won't be around to usher in 1995.
Take the example of First United Bank Group in New Mexico. This month, the banking company, which has $4 billion in assets, announced it was in merger talks with a "larger" financial institution. The day of that announcement, its share price jumped $3, or 12%, to $28.
Then there's Commercial Federal, Omaha, Neb. Shares of the thrift, which has $4.8 billion in assets, have been rising since mid-June when its biggest shareholders announced plans to have investors vote on whether the bank should solicit takeover offers. The share price went as high as $27.75 before retreating. The stock closed Monday at $25.375, up $1.125.