American Express Will Buy All of Shearson’s Stock : Securities: The $350-million deal will give American Express more flexibility to shed assets and take other steps to streamline the brokerage.

American Express Co. moved boldly Sunday to quell speculation about the future of its troubled brokerage unit, Shearson Lehman Hutton Inc., announcing that it had ended talks with all other parties and would instead buy all of the Shearson shares that it doesn’t already own.

American Express currently owns 61% of Shearson. The company said it proposed to Shearson’s board a tax-free exchange of stock that would give the company 100% of Shearson’s common stock. The move would be in addition to an already announced $750-million infusion of capital into Shearson by American Express. Based on the closing prices Friday of the two companies’ stock, the merger is valued at $350 million.

Shearson said the transaction must be approved by a special independent committee of Shearson’s board, established to consider the offer. The committee, advised by the investment bank Dillon Read & Co., must determine if the offer is fair to Shearson’s minority shareholders.

The decision to take Shearson private represents a radical change of course for American Express, a diversified financial services company, which since last summer had been quietly seeking a buyer for all or part of Shearson. The brokerage, one of the two largest in the country, has been a drag on American Express’ earnings. Sources said by buying all of Shearson’s remaining shares, the parent company would have much more flexibility to shed assets and take other steps to streamline the brokerage.

In a statement, James D. Robinson III, American Express’ chairman and chief executive, said, “We are confident that Shearson Lehman Hutton can be returned to levels of profitability that will maintain its position as a premier company in the securities industry.”

The announcement followed a week of reports that American Express had held talks with Primerica Corp., the parent firm of the brokerage Smith Barney, Harris Upham & Co., about a possible merger. Sources said negotiations went on between Robinson and Sanford I. Weill, Primerica’s chairman. Weill, a former chairman of Shearson, essentially built the brokerage firm before selling it to American Express in 1981. Sources have said he had a keen interest in returning to a position of control.

But the sources said discussions between Robinson and Weill never progressed to the point where concrete offers were put on the table. “The bid and asked were just too far apart,” one source said.

The announcement came following a late afternoon meeting of American Express’ board. There was strong speculation Sunday that American Express’ directors acted swiftly because of fear over the unsettled state of the securities industry in the aftermath of the sudden collapse two weeks ago of Drexel Burnham Lambert. American Express directors are understood to have been concerned that Shearson might have been subject to a catastrophic loss of confidence, as was Drexel just before its demise, if something definitive wasn’t done quickly.

A Shearson spokesman said the board acted because “It would send a clear and unequivocal message to the world that we believe in Shearson, that we’re there to support it.”

As an investment bank, Shearson is very heavily focused on its retail brokerage operations--the selling of stocks, bonds and other securities to relatively small investors. In part because of this focus, the firm was among the hardest hit following the stock market crash of 1987, which caused many small investors to pull out of the market.

American Express last month canceled plans to reduce its stake in Shearson by selling a $250-million rights offering to the public. American Express then moved to strengthen its grip on Shearson last month by ousting Chairman and Chief Executive Peter A. Cohen, the man who had guided the firm’s expansion in the 1980s to become one of the nation’s largest brokerages.

Howard Clark Jr., American Express’ chief financial officer, took over as Shearson’s chief executive. On Sunday, American Express’ board named Clark to the additional position of chairman of Shearson.

Under the merger proposed by American Express, the company said it would exchange 0.426 of its own shares for each Shearson share that it doesn’t already own. On Friday, American Express’ stock closed at $29.375. Shearson’s stock closed at $12.50. American Express said 13 million shares of Shearson voting preferred stock, owned by Lippon Life Insurance Co., would remain outstanding. The holdings give Nippon a voting stake in Shearson of about 13%.

Last week, Shearson said it would cut 2,000 employees from its staff of 35,000, as part of an overall effort to stem losses and save $400 million annually.