Traders See Offer as Too Low : Price of Marine Midland Stock Soars
Marine Midland Banks Inc.’s stock soared to an all-time high Thursday as Wall Street gave a solid thumbs-down to a $677-million offer from Hongkong & Shanghai Banking Corp. to buy the 48% of Marine it doesn’t already own.
In trading on the New York Stock Exchange, Marine Midland rose $18 to $77.75, far exceeding Hongkong’s cash bid Wednesday of $70 per share, which had represented a 38.8% premium over Marine’s average closing price this year.
The previous all-time high for the Buffalo, N.Y.-based bank holding company was reached June 18, when the stock traded at $60.63, after Marine Midland announced it was increasing its loan-loss reserve to cover shaky foreign loans.
Banking analysts said that the sharp rise in Marine Midland’s stock showed Wall Street believed Hongkong would have to raise its bid to receive shareholder approval.
“It appears to me, and to some others as well, that the $70-a-share price is too low and doesn’t reflect the improvement in fundamentals that Marine has had and will continue to have over the next year,” said Cheryl Swaim, a banking analyst at the securities firm Oppenheimer & Co.
Third-Party Possibility?
Brent Erensel, first vice president of Dean Witter Reynolds Inc., added that some investors probably thought “there was a remote possibility that a third party might enter the fray.”
Swaim said a $79-per-share bid would better reflect Marine’s strength in such areas as consumer auto financing and credit cards.
She predicted that the company would turn a slight profit by the third quarter and earn about $11.25 per share in all of 1988.
She said the recently posted $294.6-million second-quarter loss, which compared to a profit of $33.1 million, or $1.66 a share, last year, was only a temporary setback. The loss had reflected Marine Midland’s decision to increase its loan-loss reserve to cover shaky Third World loans. Leslie Uyeda, a spokeswoman for the Hong Kong-based bank, said Thursday that the company would have no comment on market speculation. Marine Midland spokesman William Ahearn added that Marine’s board was still studying the proposal and would have no further comments.
How Banks Compare
Hongkong, one of the 25 largest banking organizations in the world with assets of $91 billion, reported group profits of $392 million for 1986. Marine is the nation’s 16th-largest bank holding company, with assets of $24.39 billion.
Hongkong Chairman William Purves, who proposed the $677-million offer in a letter Wednesday to Marine’s board, said that if Marine was to continue growing it would need more financial support. The company owned about 52% of Marine Midland’s 18,874,624 shares outstanding as of June 30.
Purves said Hongkong “feels it is no longer willing to provide additional capital for (Marine’s) continued growth so long as (Hongkong) receives only a part of the benefits.”
“Increasing our ownership to 100% would balance the risks and rewards of our investment,” Purves said in a statement.
He also stressed that Marine would remain an independent U.S. bank with its own name and separate headquarters.
Under a 1979 agreement, Marine Midland would have to call a special shareholders’ meeting to vote on the proposal within 120 days, or by Nov. 12. The agreement also requires that Hongkong’s shares must be voted in accordance with the majority of votes cast by other shareholders.
