Amex Sweetens Offer for Shearson Buyout

American Express Co. today sweetened its purchase of outstanding shares of Shearson Lehman Hutton Inc. and said it will give its struggling securities unit $750 million in capital as previously announced.

The moves came amid reports that Shearson, the second-largest Wall Street firm, is planning a first-quarter charge against earnings of more than $700 million, which would be the largest ever in the securities industry.

American Express said each publicly held Shearson share will be converted into 0.48 of a share of American Express stock. That will be a 12.7% increase from the 0.426 a share announced earlier this month.

The deal marks a reversal for American Express, which had planned to reduce its majority stake in the Wall Street firm that is struggling because of overexpansion and a recession in the securities industry. When completed, American Express will own about 92% of Shearson.

The plan was approved late Monday by Shearson’s board on the recommendation of a special committee of Shearson directors and the American Express board.

Shearson stock jumped $1.12 1/2 to $12.37 1/2 in early New York Stock Exchange trading today. American Express fell 50 cents to $26.37 1/2.

Meanwhile, The Wall Street Journal reported that Shearson is expected to take a charge against earnings of $700 million to $800 million in the first quarter.

The charge would cover severance payments for about 2,000 laid-off workers, the cost of closing about 50 branch offices, reserves against losses at Shearson’s Balcor Co. real estate unit and lease payments for businesses Shearson plans to leave.

Shearson and American Express said in a joint statement that attorneys for shareholders had agreed to drop class-action suits challenging the merger, pending court approval.

The suits claimed that American Express was offering too little for the Shearson stock, which it had sold at $34 a share in an initial public offering in 1987.