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SunTrust Banks, Inc. Message Board

  • senatorbuzz senatorbuzz May 15, 2007 1:10 PM Flag

    Smart Moves by STI Management

    Wells is positioning the company to "increase shareholder value." In laymen's terms, that means
    a. sell the company for a premium (most likely scenario)
    b. if the sale doesn't happen, position the company to succeed independently (hedging his bets).

    I suspect a sale in the next 12 months is most likely:
    1. STI no longer makes mention of a desire to remain independent. This subtle wording change is significant & has followed the patterns of statements by other companies prior to being bought.
    2. Coke stock has been seen as a poison pill for sale. Selling the stock eliminates that takeover obstacle, and provides cash for the bank to use to further its banking business if no buyout occurs (or buy back more STI stock). Look for more sales throughout the year to eliminate the obstacle totally.
    3. STI is buying back its own stock. Clearly it feels an upward turn is coming. A merger would do that.
    4. Cost reductions (staff cuts, outsourcing, etc.) will improve STI's earnings-to-expenses ratio in the short term and thereby raise the stock price & buyout premium. Major cost slashing & outsourcing may be harmful in the long run, but that won't matter if the company is purchased.

    It's all about "shareholder value", not "keeping employees happily employed", not "maintaining a southern tradition with Coke ownership", not "helping Atlanta keep a corporate headquarters of a large bank", not "remaining independent". The best value for an investor is to be bought out with a premium. Wells is doing a great job to position the company to make that possible.

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