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  • inlet_boater inlet_boater Jun 27, 2008 12:04 PM Flag

    Suntrust takeover rumors

    IMO there is no substance to these rumors. They have come up from time to time and they never pan out. There is a reason this happens.

    Suntrust has a built in poison pill. Ever heard of a company called Coca-Cola? Suntrust was the bank that funded the start up of Coca-cola over a 100 years ago. As part of that STI received some Coke stock. That is now about 85 million shares of stock. Suntrust's cost basis is essentilally zero. That means the whole $4.5 billion becomes a profit if a change of ownership happens. So anyone taking over STI gets a huge tax bill. Tis IMO serves as a poison pill to any take over of Suntrust by a healthy bank with earnings like JPM.

    Why take on a huge tax bill when you can buy equally attractive bank assets without it?

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    • Thasnks for your source and update.

    • you sound like the guard on Shawshank redemptiuon when he find sout he inherited the money. Good grief.

      The KO shares IF your scenariois even true would be accounted for in a takeover, taxes figured in and the difference would be calculated as a one time gain. The sale price would be adjusted for this and noted seperately. Sheesh. A ["poison pill"... get serious.

    • But the acquirer could totally cleanse the portfolio with writeoffs to offset the tax bill. It is actually a sugar pill.

      • 1 Reply to wachover
      • But the acquirer could totally cleanse the portfolio with writeoffs to offset the tax bill. It is actually a sugar pill.

        Comment: Your statement ignores what I said. I said:
        "This IMO serves as a poison pill to any take over of Suntrust by a healthy bank with earnings like JPM." Hell, it might make sense for a bank like Citi with big losses, but those banks probably can't afford the ticket to play.

        HEALTHY bank with EARNINGS like JPM (that is what I said). Sure they could inflate reserves to reduce earnings, but at some point the reserves have to get used or they cannot take as much reserves in following years. So sure they can play games. They might come up with writeoffs, but what is the point (they could reduce existing earning as well with writeoffs). Besides no bank in this environment wants to take big writeoffs signalling to the market they may have problems and pay the price that will be extracted by the market price in the stock.

    • Hey, ole berky lives

    • Ouch, Dude, don't you look stupid.

    • I accept your apology for your uneducated, uninformed reply to my post. Mine was purely to inform and not done in a "nasty" way. But children who know everything usually act spoiled with bad manners. Don't get your investment advise from Yahoo.

    • inlet:
      Check the 3/31/08 10Q for how much KO stock Suntrust actually owns...the remainder is just an educated guess that it is likely held in many trust accounts at STI...

      Securities Available for Sale

      The securities portfolio is managed as part of the overall asset and liability management process to optimize income and market performance over an entire interest rate cycle while mitigating risk. In the first quarter of 2008, the portfolio size and security mix remained relatively constant with cash flow primarily reinvested into longer duration agency mortgage-backed securities.

      The average yield for the first quarter of 2008 decreased to 6.18% compared to 6.44% in the first quarter of 2007 and was unchanged compared to the fourth quarter of 2007. The size of the securities portfolio, at fair value, was $15.9 billion as of March 31, 2008, a decrease of $0.4 billion, or 2.3%, from December 31, 2007. The carrying value of available for sale securities reflected $2.8 billion in net unrealized gains as of March 31, 2008, comprised of a $2.7 billion unrealized gain from our remaining 43.6 million shares of The Coca-Cola Company and a $0.1 billion net unrealized gain on the remainder of the portfolio. The portfolio’s effective duration increased to 4.3% as of March 31, 2008 from 3.9% as of December 31, 2007. Effective duration is a measure of price sensitivity of a bond portfolio to an immediate change in interest rates, taking into consideration embedded options. An effective duration of 4.3% suggests an expected price change of 4.3% for a one percent instantaneous change in interest rates.

    • This "poison pill" KO stock talk is silly. One, the stock would be sold, privately, back to KO or another buyer, not in the open market. Acquirer would receive the gain minus the tax. This is not a poison pill.

    • either way the sti ownership of ko is pretty large and the "pill" impact would continue to be a issue for any acquirer. i think boater is right about that, it does protect sti.

    • If you have a data source breaking this out for us then post it.

      Otherwise, it is speculation as to whether/how much is held in trust for others. The number I used was the number on Yahoo for KO major holders.

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