Opportunity is knocking for corporations that own sizable stakes in other companies. At today's fire-sale prices, they might seize the moment to buy the remaining shares they don't already own. This explains in part why some pros have been snapping up Alliance Capital Management Holding (AC
), which tumbled from nearly 60 in late January to 37 on Mar. 22. Lately, though, the stock has edged up to 39, possibly signaling fresh institutional nibbles at the stock.
Part of the reason: Alliance, an asset manager that shepherds some $454 billion, is 53% owned by France's AXA Group. "Alliance fits the profile of a takeover target: It is in a rapidly consolidating industry and is part-owned by another company," says Charles LaLoggia, co-author of a new book, The Superstock Investor. LaLoggia focuses on identifying "telltale signs" indicating that companies are takeover bait.
Last year, AXA acquired AXA Financial--formerly Equitable Assurance--in which it already had a 57% stake. It also got out of the brokerage business by selling its 71% stake in Donaldson, Lufkin & Jenrette to Credit Suisse Group. This is part of the new strategy of AXA Chairman Henri de Castries, who has stated that he considers asset management AXA's core business. "It sold DLJ when prices of brokerage firms were at their highs and then acquired all of AXA Financial," says LaLoggia. To him, that raises the possibility that AXA will ultimately buy the remaining 47% of Alliance. The more Alliance's stock drops, the more likely the buyout becomes, adds LaLoggia, who figures Alliance is worth 55 to 60 in a takeover. On fundamentals alone, Guy Moszkowski of Salomon Smith Barney has a price target of 56. Alliance spokesman John Meyers declined comment as a matter of policy.
By Gene G. Marcial
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