Magazine article American Banker

Lehman Jumps to No. 1 Spot on Hit List among Brokerages after Salomon Deal

Magazine article American Banker

Lehman Jumps to No. 1 Spot on Hit List among Brokerages after Salomon Deal

Article excerpt

In the wake of Travelers Corp.'s deal to buy Salomon Inc., investors zeroed in on Lehman Brothers Inc. as the brokerage firm most likely to be bought-but steered clear of the other major brokerages.

Lehman's shares rose 3.8% while other major brokerages' shares held steady or fell as the market continued to react to Wednesday's news that Salomon had agreed to a $9 billion sale to Travelers.

"Clearly, Lehman Brothers has been touted as the No. 1 takeover candidate, basically because it is believed not to be as profitable as the other companies," said bank analyst Richard X. Bove of Raymond James & Associates, St. Petersburg, Fla. "The scuttlebutt in the market is that the company is weak and that it is going to be sold."

But while Lehman continued to rise, PaineWebber Inc.'s stock rose only slightly, and Donaldson, Lufkin Jenrette Securities Corp., Merrill Lynch & Co., and Bear, Stearns & Co. slipped. Some blamed the price of the Salomon deal for throwing cold water on merger speculation.

The 10% premium to market price that Travelers will pay appears paltry next to the 25% that has often been paid in bank mergers.

Indeed, analyst Raphael Soifer of Brown Brothers Harriman & Co. advised investors to take their profits from the Salomon sale and plow the money in the shares of major banks.

Mr. Soifer downgraded Salomon to short-term "avoid" from short- term "hold."

Traveler's is acquiring Salomon Brothers in a stock swap in which 1. …

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