Shares of Alex. Brown Inc. and Legg Mason Inc. surged to new highs this week on speculation that one or both of them could be acquired by large financial services companies.
Alex. Brown's stock raced to a 52-week high yesterday of $57 a share, up 62.5 cents, and Legg Mason's stock closed at $48.875 a share, down 12.5 cents, after setting a 52-week high of $50 on Thursday.
The latest jump in stock prices follows Wednesday's announcement that Morgan Stanley Group Inc. and Dean Witter, Discover & Co. would merge to create the country's largest asset management company with a market capitalization of $23 billion and $270 billion in assets under management.
"Every time someone gets taken over, everyone else becomes likely candidates, and the rumor mill starts going crazy," said a trader at a Baltimore-based financial services company, who did not want to be identified.
One rumor circulating is that New York-based Bear Stearns Cos., the nation's sixth largest securities firm, is looking to buy either Alex. Brown or Legg Mason.
Officials from the three firms declined to comment. "I don't answer these questions," said Raymond A. Mason, chairman and chief executive of Legg Mason. But a source close to the company said no such discussions with Bear Stearns officials have taken place.
A. B. "Buzzy" Krongard, chairman and chief executive of Alex. Brown, said it is the company's policy "not to comment on any rumors about our demise."
Peter A. Russ, an analyst with New York-based Shelby Cullom Davis & Co., said it would be a logical step for Bear Stearns to link up with Legg Mason, which has a large retail brokerage operation with about 100 offices nationwide. "That is a merger that would make sense," Russ said. "It could be a strong asset-gathering business. It has a larger retail presence and a nice money-management business. It would be an acquisition that Bear could dominate."
But a deal with Alex. Brown is unlikely because Bear Stearns would have to pay a huge premium for the investment banking and brokerage firm, Russ said.
Michael A. Flanagan, an analyst with Philadelphia-based Financial Service Analytics Inc., said a Bear Stearns merger with either of the two Baltimore firms would be highly unlikely, and a "supreme mismatch of culture, character, style and strategy." He added, "Bear Stearns is obsessed with being one of the biggest and most competitive firms, while Alex. Brown is determined to be one of the highest quality firms."
One result the rumors have had is to drive up the stock prices of both brokerage firms. Alex. Brown's stock increased by $4.25 since Monday, and Legg Mason's stock added $2.875 a share.
Pub Date: 2/08/97