Amadeusz Juskowiak

American express axp seen in possible spinnoff

American Express Co remained silent on market rumors it would spinoff all or part of its Shearson Lehman Brothers Inc but some analysts said the company may be considering such a move because it is unhappy with the market value of its stock

American Express stock got a lift from the rumor as the market calculated a partially public Shearson may command a good market value thereby boosting the total value of American Express The rumor also was accompanied by talk the financial services firm would split its stock and boost its dividend

American Express closed on the New York Stock Exchange at 7258 up 418 on heavy volume

American Express would not comment on the rumors or its stock activity

Analysts said comments by the company at an analysts meeting Tuesday helped fuel the rumors as did an announcement yesterday of management changes

At the meeting company officials said American Express stock is undervalued and does not fully reflect the performance of Shearson according to analysts

Yesterday Shearson said it was elevating its chief operating officer Jeffery Lane to the added position of president which had been vacant It also created four new positions for chairmen of its operating divisions

Analysts speculated a partial spinoff would make most sense contrary to one variation on market rumors of a total spinoff

Some analysts however disagreed that any spinoff of Shearson would be good since it is a strong profit center for American Express contributing about 20 pct of earnings last year

I think it is highly unlikely that American Express is going to sell shearson said Perrin Long of Lipper Analytical He questioned what would be a better investment than a very profitable securities firm

Several analysts said American Express is not in need of cash which might be the only reason to sell a part of a strong asset

But others believe the company could very well of considered the option of spinning out part of Shearson and one rumor suggests selling about 20 pct of it in the market

Larry Eckenfelder of PrudentialBache Securities said he believes American Express could have considered a partial spinoff in the past

Shearson being as profitable as it is would have fetched a big premium in the market place Shearsons book value is in the 14 mln dlr range Shearson in the market place would probably be worth three to 35 bilion dlrs in terms of market capitalization said Eckenfelder

Some analysts said American Express could use capital since it plans to expand globally

They have enormous internal growth plans that takes capital You want your stock to reflect realistic valuations to enhance your ability to make all kinds of endeavors down the road said EF Hutton Group analyst Michael Lewis

Theyve outlined the fact that theyre investing heavily in the future which goes heavily into the international arena said Lewis That does not preclude acquisitions and divestitures along the way he said

Lewis said if American Express reduced its exposure to the brokerage business by selling part of shearson its stock might better reflect other assets such as the travel related services business

It could find its true water mark with a lesser exposure to brokerage The value of the other components could command a higher multiple because they constitute a higher percentage of the total operating earnings of the company he said

Lewis said Shearson contributed 316 mln in aftertax operating earnings up from about 200 mln dlrs in 1985