Magazine article American Banker

Marshall & Ilsley Retreats as Rumor of Buyout Bid Fizzles

Magazine article American Banker

Marshall & Ilsley Retreats as Rumor of Buyout Bid Fizzles

Article excerpt

After a sharp run-up Wednesday, Marshall & Ilsley Corp.'s share price fell back Thursday when a rumored takeover bid failed to emerge. Some saw the retreat as a new buying opportunity.

"I would tell people you don't have to buy [Marshall & Ilsley] as a takeover play - you can buy it purely on the fundamentals," said Salomon Brothers analyst Richard Strauss.

Indeed, the Milwaukee-based company is one of the brightest stars in the midwestern banking firmament. Given its appeal, Marshall & Ilsley's stock often trades on takeover speculation.

That's what happened Wednesday, when the stock shot up $3 to a new 52-week high of $61.75 a share on a rumor that Harris Bankcorp, a Chicago-based subsidiary of Bank of Montreal, was mulling a bid. On Thursday, the stock promptly retreated, closing at $60.75 a share, down $1.

At that level, Marshall & Ilsley is trading at about 12 times Mr. Strauss' 1992 earnings estimate of $5.10 a share. That represents a slight discount to other regionals followed by the Salomon Brothers analyst.

But he and other analysts agree that Marshall & Ilsley deserves to trade at a premium, given the twin strengths of its core banking franchise and data-processing subsidiary, M&I Data Services Inc.

"This is literally one of the most profitable banks in the country," said Mr. Strauss, who thinks the stock should be trading at $70 to $75 a share based on the fundamentals alone.

The company's first-quarter return on assets was 1. …

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