Price to split its stock 2-for-1

Move is expected to ease acquisitions

June 09, 2006|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

T. Rowe Price Group Inc., the Baltimore-based investment management firm, announced yesterday a 2-for-1 stock split that would make more shares available on the market for investors and double the number of shares in company coffers that could be used to make acquisitions.

Under the plan approved by Price's board of directors, stockholders will be paid on June 23 one additional share for each share owned as of June 19. The board also declared a quarterly dividend of 14 cents per share, or half the regular dividend, that will be paid July 11.

Price shares rose 13 cents, or less than 1 percent, to $77.47 yesterday on the Nasdaq stock market.

The split could make the stock more attractive for retail investors who had found the shares too pricey, or for institutional investors who are looking to get into stocks with more liquidity, meaning they can be bought and sold more easily simply because there are more of them.

The additional shares also could help Price expand, said Matt Snowling, an analyst with Friedman Billings Ramsey in Virginia. Price recently picked up TD Waterhouse funds as well as funds managed by Caterpillar Inc.'s investment management subsidiary, and Price Chairman George A. Roche has said the company is still pursuing acquisitions.

"They only have a limited number of shares in their treasury; now they've doubled that," said Snowling, who doesn't own Price shares. "They've been pretty clear in their desire to go out and buy assets, and this is going to be a buyer's market. There are a lot of money managers that haven't achieved scale and are facing pressure to sell."

This is Price's first stock split in eight years. Roche said the company historically has enacted stock splits when the shares trade in the $60 to $70 range on a sustained basis. Price stock fell from a peak in 2000, caught in a bear market like many of its peers, and traded at a lower range for several years until it started to gain momentum in 2004. The shares hit an all-time high when it passed $87 per share in April.

"This is in line with what we've been doing," Roche said. "Some of our longtime shareholders have called up and said, `George why haven't you split the stock?'"

Price's stock in the past month has been caught up in another market downdraft - a sell-off that has wiped out gains on the Nasdaq composite index for the year. Such broad-based market downturns tend to hit brokerages and money managers hard because their revenues are directly related to market returns.

Stock splits have no effect on an investment's value, as a stock trading at $100 becomes two shares worth $50. Nonetheless, corporate announcements of stock splits tend to provide a share-price bounce. Splits are considered a bullish signal from senior executives because, presumably, they wouldn't consider such a move if they anticipate tough times ahead for the stock.

laura.smitherman@baltsun.com

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