American Express to Get Cash in Nippon Deal
American Express Co. said Friday that it will receive a $200-million cash infusion from Nippon Life Insurance Co., strengthening an alliance between the two financial services giants that began more than two years ago.
Under terms of their agreement, Nippon will purchase American Express exchangeable preferred shares, which can be converted at any time to American Express common stock at a share price of $42.50. Should Nippon exercise those rights, as well as a warrant issued in 1987 allowing it to purchase 2 million American Express shares at $50 apiece, the Japanese insurance giant would have a 1.6% stake in American Express, according to American Express spokesman Matthew Stover.
On the New York Stock Exchange, American Express fell 37.50 cents to close at $34.50 a share. The stock’s 52-week high is $39.3750 a share.
Nippon and American Express forged an alliance in May, 1987, when Nippon purchased a 13% stake in Shearson Lehman Hutton Inc., the brokerage firm controlled by American Express.
Shearson, Wall Street’s second-largest brokerage, has suffered recently from weak profits and is in the process of a $900-million recapitalization program spearheaded by American Express. The restructuring, unveiled last month, followed announcements that Shearson would lay off hundreds of employees and make deep cuts in stockbroker commissions.
American Express officials were quick to point out that Nippon’s current investment plans have nothing to do with Shearson.
“The timing was coincidental,” Stover said. “We have a relationship with Nippon, we’ve done a lot of things with them. They have expressed an interest in investing in American Express, and now they’re doing it.”
Stover called the investment a “reflection of the close cooperation between the two companies.”
Japanese firms have had a long-standing interest in investing in American financial companies. In 1986 Sumitomo Bank Ltd. invested about $500 million in Goldman, Sachs & Co. in return for a non-voting stake in the firm.
Little more than a year later, Yasuda Mutual Life Insurance Co. paid $300 million for an 18% voting stake in Paine Webber Group Inc.
