Magazine article American Banker

Commerce to Sell? Why Some Doubt It Will Occur

Magazine article American Banker

Commerce to Sell? Why Some Doubt It Will Occur

Article excerpt

Though many analysts labeled Commerce Bancorp Inc. a likely seller Friday, the weekend convinced some of their competitors that a new management team and slower growth prospects do not make the Cherry Hill, N.J., company vulnerable to a takeover.

"While takeout speculation ... will continue to swirl, we think the likelihood of a near-term takeout is fairly low, as we think the company would be challenged to sell while under such intense regulatory scrutiny," Robert Hughes of KBW Inc.'s Keefe, Bruyette & Woods wrote in a research report issued Monday.

He upgraded Commerce's shares to "market perform," from "underperform," in part because "speculation should lend a new level of support to the shares."

On Friday, Commerce's board signed two enforcement orders with regulators and, bowing to pressure, asked Vernon W. Hill 2nd, its founder, chairman, and chief executive, to leave.

Several analysts said that once Commerce gets out of its regulatory penalty box, it should continue to grow faster than its competitors.

"People who believe that there is a takeout coming believe that the franchise can't operate as well without Vernon. I disagree," said Jennifer Thompson, an analyst with Oppenheimer & Co. Inc. "I can't come up with one [buyer] for whom I can, with conviction, say, 'This would make a lot of sense.' "

Though Commerce has an attractive retail operation, she said, it would demand a high price and "would be very difficult to integrate into an existing branch network."

Steven Alexopoulos, a JPMorgan Securities LLC analyst, said Commerce executives are likely to focus more on restoring the company's luster and cleaning up corporate governance than on a sale.

"Management has a huge opportunity," he said. "Why would they miss that" by selling the company.

Robert D. Falese Jr., the head of commercial banking, was appointed the bank's president and CEO and is expected to become the holding company's CEO when Mr. …

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