Bankers Trust Dividends Make Brown Sale Palatable

Investing

April 21, 1997|By Bill Atkinson

DAVID BOYD WAS fuming the day he read in The Sun that Alex. Brown Inc. had agreed to sell to Bankers Trust New York Corp.

The retired Towson State University professor grumbled that the deal was just another example of the rich getting richer.

He was so mad, he was going to sell some of his 475 shares of Alex. Brown and spend the money on a "super vacation."

Now, he's having second thoughts.

One reason: Bankers Trust pays a hefty $4 annual dividend -- more than five times what Alex. Brown pays a year. Bankers Trust has paid $1 a quarter since 1994.

The dividend alone can add up to millions in earnings for shareholders who hold large amounts of stock.

Boyd, however, is right about one thing: The rich will get richer.

Peter R. Kellogg, Brown's largest stockholder, for example, has 2.5 million shares, or 9.96 percent of Brown's shares, according to Brown's proxy statement filed with the Securities and Exchange Commission.

When his shares are converted to Bankers Trust stock -- one share of Brown for every 0.83 shares of Bankers Trust -- he will hold about 2 million shares. In dividends alone, he stands to earn $8.2 million a year.

Compare that to the $1.7 million he earned as an Alex. Brown shareholder.

Kellogg, who is chief executive with Spear, Leeds & Kellogg, a New York-based firm that specializes in filling stockbrokers' orders for a fee, declined to comment.

"How's the weather in Baltimore?" he asked.

Even Boyd stands to make more money.

He earned $323 in dividends last year as an Alex. Brown stockholder. As a Bankers Trust stockholder, he would receive $1,578.

"You can't turn your nose up at that," Boyd said.

On paper, the value of Brown stockholders' shares would also jump if Bankers Trust's stock holds firm. The deal is expected to close in the fourth quarter.

Since it was announced on April 6, Bankers Trust stock has fallen $5.75 a share.

If Kellogg's shares were converted last Friday, they would be worth $157.2 million on paper, compared with $149.1 million if they were still Alex. Brown shares.

He isn't the only one who could cash in big.

Benjamin H. Griswold IV, chairman emeritus of Alex. Brown, has 667,277 shares, some of which he holds for family trusts. They would be worth about $42 million on paper if they were converted on Friday.

A. B. "Buzzy" Krongard, Alex. Brown chairman and chief executive, holds 564,725 shares, worth $35.8 million on paper. Krongard has the option of converting debentures into 111,346 shares of Alex. Brown stock over the next three months.

Thomas Schweizer Jr., a top executive in Brown's private client division, holds 280,649 shares, worth $17.8 million on paper if they were converted Friday.

Boyd, who has owned shares in Alex. Brown for 11 years, still has reservations.

"How many people who want to keep a job with Alex. Brown will have to move to New York?" he asked.

Pub Date: 4/21/97

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