Very often, when a publicly traded company is the focus of takeover interest, investors are attracted to its stock. That was the case earlier this week when a media report stated that banking conglomerate Northern Trust (NTRS 1.17%) had been approached by a potential suitor.
That juiced its shares, which, according to data compiled by S&P Global Market Intelligence, ended the week more than 11% higher in price.
An apparent suitor
On Sunday, The Wall Street Journal broke the news that Bank of New York Mellon (BK 1.40%)Â indicated to Northern Trust that it desired a merger with the smaller banking group. This quickly made its way to the highest levels of management, as according to unnamed “people familiar with the matter,” the CEOs of the two companies had at least one conversation on a potential deal.
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The newspaper’s sources said the discussions didn’t advance to talks of a specific offer. At the time, it reported that Mellon is mulling its next move. This might indeed result in a formal offer being made. While the Journal used the word “merger” in writing about a potential deal, in all likelihood, any sort of arrangement would be more of an acquisition by Mellon.
Given that, it won’t be a cheap purchase. Northern Trust’s market cap is over $24 billion, which would mean a hefty price tag, even at a modest premium.
An unfolding saga worth following
Neither Northern Trust nor Mellon has yet publicly commented on the report, and I wouldn’t expect them to if talks are indeed at an early stage. I’d imagine any premium paid will be somewhat generous, given Mellon’s apparent eagerness to bulk up with an already-sizable asset.
This story is well worth monitoring for shareholders of both banks.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
