'Not for sale,' Signet insists amid rumors Stock hits a record after having languished along with earnings

Carolina suitors?

First Union not talking, but it and Wachovia alleged to be interested

September 28, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Signet Banking Corp. yesterday denied that it is in merger or takeover discussions after rumors drove its stock price up in morning trading.

Before Signet halted trading at 11: 49 a.m., its shares had risen 6.9 percent from Thursday's close, to $29 a share, on speculation that the company might be the target of Charlotte, N.C.-based First Union Corp. Trading was resumed about an hour later.

"We are not for sale," said Signet spokeswoman Teri Schrettenbrunner, who said the company was breaking its policy of not commenting on rumors. "There has been a lot of speculation in the market lately and there are some very unfounded rumors that are highly, highly speculative."

A First Union spokesman said the company doesn't comment on rumors.

Signet's shares began trading heavily Tuesday and Wednesday on rumors that Winston-Salem, N.C.-based Wachovia Corp. could be a buyer. Yesterday, more than 1.4 million shares of Signet changed hands, more than four times its average daily volume during 1996. Despite the bank's denial, its shares closed at a record $28.75, up $1.625 a share.

The $11.5 billion-asset Signet's earnings and stock price have been flat, analysts say. For several quarters Signet has posted per-share earnings in the 50-cent range. Its average stock price this year has been $23.613, compared with an average of $22.299 in 1995.

"The bank is clearly in a situation of being vulnerable to an offer because management hasn't been able to show the stock price that they think they ought to," said John A. Bailey, an analyst with Friedman, Billings, Ramsey, a Rosslyn, Va.-based brokerage and investment banking firm. "Either you produce the stock price or you sell the company."

Signet Bank/Maryland is one of the major banks operating in the Baltimore area, with 83 branches statewide.

Vernon Plack, an analyst with Richmond, Va.-based Scott & Stringfellow, said a match between First Union and Signet would make sense.

First Union "could pay a good price for the franchise," he said. "I think First Union could pay $40 a share."

Plack said First Union would profit quickly in a deal since both companies have operations in several of the same cities, including Baltimore and Washington.

"There is enough branch overlap within the system that First Union could realize some significant economies," he said. "First Union could go in and close a lot of branches

and consolidate a lot of customers and get rid of most of the back-office people. It would be a transaction that, even at $40, would add to earnings in a relatively short period of time."

Most analysts expect Signet to post flat earnings in the third quarter of 51 cents a share and 56 cents a share in the fourth quarter. Some have confidence that the company can execute a strategy that calls not only for cutting costs but also for the continued development of a program that offers customers a variety of products through the mail nationwide.

"In our view, shares of Signet Banking represent one of the most compelling values in the banking sector today," said Thomas D. McCandless, a banking analyst with NatWest Securities Corp. in a Sept. 13 report.

Pub Date: 9/28/96

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