Riggs' stock up 20% on takeover rumor

March 11, 1993|By Bloomberg Business News

WASHINGTON -- Riggs National Corp.'s stock has risen 20 percent since late last month amid speculation that the bank could be taken over.

Takeover speculation has been fueled by two bank transactions in the Washington area. First Union Corp. has agreed to pay $453 million for most of First American Bankshares Inc.; NationsBank Corp. has said it will acquire MNC Financial Inc. for $1.4 billion.

Riggs' stock closed yesterday at $11.125, up 12.5 cents from Tuesday and up 20 percent from its closing price of $9.25 on Feb. 25.

The bank, with $5 billion in assets, lost $19.8 million in 1992, after losing $63.5 million in 1991 and $56.6 million in 1990.

Joe Allbritton, chairman and chief executive officer, can effectively block a hostile takeover, because he has voting control over 34 percent of the bank's stock. Last month, Mr. Allbritton stepped down as chief executive officer of the company's banking unit.

In the past, Mr. Allbritton has opposed selling the company. His position now is less clear, according to John Bailey, an analyst at Ferris Baker Watts in Baltimore.

"They're bringing in a consultant to cut costs, and that is not going to make Riggs a pleasant place to be," Mr. Bailey said.

Several high-ranking Riggs officials have already left. Ray Williams resigned as president of Riggs in July, after five months in the post. Frank Langhammer III, executive vice president for corporate commercial banking, and Walter Howell, executive vice president for retail banking, resigned this year.

In addition, Mr. Allbritton is 68 years old and has donated some of his Riggs stock to a foundation named after him.

If another bank does make an offer for Riggs, Mr. Bailey said, the stock will not necessarily rise. After analyzing Riggs' revenues and expenses, Mr. Bailey concluded that the stock is worth $9 a share, the same as the company's book value per share at the end of last year.

Vernon Plack, an analyst at Johnston, Lemon in Washington, estimated that Riggs could be taken over at 1.25 to 1.5 times book value, or $11.25 to $13.50 a share, if Mr. Allbritton was willing to sell his shares. But Mr. Plack said he saw no evidence that the Riggs chief is ready to sell.

The most likely buyers of Riggs, Mr. Plack said, are Crestar Financial Corp. and Signet Banking Corp. Wachovia Corp. is another possibility, he said. Signet had $12.1 billion in assets at the end of last year, Crestar $12.7 billion.

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