TALKING POINT/AMERICAN EXPRESS <AXP>
American Express Co's plan to sell a
stake in its Shearson Lehman Brothers is believed to be a
prelude to a public offering of shares in the brokerage unit,
analysts said.
    American Express earlier said it has a general
understanding with Nippon Life Insurance Co of Japan to sell a
13 pct interest in Shearson for 530 mln dlrs.
    The statement triggered a rise in other brokerage stocks,
as investors speculated on the possibility of more investment
in the U.S. brokerage industry by Japanese concerns.
    The stocks of brokerage firms also climbed in response to
the relatively high value Nippon put on its stake in the U.S.
firm. Analysts said the 530 mln dlrs for 13 pct represents a
price of 2.7 times book value.
    Perrin Long of Lipper analytical said the brokerage stocks,
depressed somewhat by the dark cloud of the U.S. insider
trading scandal, closed out February at a market value of 1.8
times book value.
    American Express was trading today at 78-1/4, off 3/8. For
the last several weeks, the stock has been strong on rumors of
a spinoff of part of Shearson.
    Analysts said American Express and its Shearson unit will
benefit from the doors Nippon Life can open to the increasingly
important Tokyo financial markets.
    "I think this, in all honesty, is a preliminary step," said
Long.
    "What you will see probably in the future is American
Express selling an additional 17 pct in the public market and
have a public vehicle for Shearson," Long said.
    "Normally, investors do not make a major capital commitment
into an illiquid situation," he said of Nippon.
    Some analysts previously speculated a 20 pct stake in
Shearson might be sold to the public. They said the firm, like
other investment banks, needs capital to expand globally.
    American express has said the total employees of shearson
will expand by 20 pct in 1987 internationally. However, that
number is substantially lower than growth last year, a company
spokesman said.
    American Express officials would not comment beyond a
statement made this morning. That statement, however, did not
close off the possibility of a public offering or other option
for Shearson.
    David Anthony, a Smith Barney analyst, said it is possible
Shearson would be partially sold to the public. But he believes
the firm will digest the Nippon investment first.
    "I think they'll figure out what they're going to do with
the money they have," he said.
    Joan Goodman, an analyst with Pershing and Co, also said
American Express could determine to sell shares to the public.
    In its statement, the financial services giant said it is
continuing to study various plans for Shearson in addition to
the investment by Nippon.
    American Express said options under study range from
expanding Shearson's capacity to meet international competition
to broadening its access to capital.
    American Express also said the options reflect the
continuing integral role of Shearson in American Express'
worldwide financial services strategy.
    Shearson follows Goldman, Sachs and Co in finding a
Japanese partner. Goldman last year sold a 12.5 pct stake to
Sumitomo Bank in exchange for a 500 mln dlr capital infusion.
    Analysts speculated there will be more such matches.
    "Those (U.S. brokers) companies have the expertise. They
don't have the money. There's just not enough internal capital
growth," said Wertheim analyst James Hanbury, who follows other
U.S. brokerage companies.
    Hanbury said some Japanese companies, flush with cash, are
interested in the expertise of American brokers. "Those
(Japanese) companies have the capital and our companies have
the capital needs and the growth opportunities to use the
money. That's a nice marriage," he said.
    Morgan Stanley and Co <MS> rose 4-1/4 to 74-7/8. First
Boston Corp <FBC> was up one to 51-1/4. E.F. Hutton Group <EFH>
rose 1-1/4 to 41-1/8, and PaineWebber Group <PWJ> climbed 7/8
to 37-3/4. Merrill Lynch and Co, recommended today by a
PaineWebber analyst, rose 2-5/8 to 45-3/8.
 Reuter
