AMERICAN EXPRESS <AXP> SEEN IN POSSIBLE SPINNOFF
American Express Co remained silent on
market rumors it would spinoff all or part of its Shearson
Lehman Brothers Inc, but some analysts said the company may be
considering such a move because it is unhappy with the market
value of its stock.
    American Express stock got a lift from the rumor, as the
market calculated a partially public Shearson may command a
good market value, thereby boosting the total value of American
Express. The rumor also was accompanied by talk the financial
services firm would split its stock and boost its dividend.
    American Express closed on the New York Stock Exchange at
72-5/8, up 4-1/8 on heavy volume.
    American Express would not comment on the rumors or its
stock activity.
    Analysts said comments by the company at an analysts'
meeting Tuesday helped fuel the rumors as did an announcement
yesterday of management changes.
    At the meeting, company officials said American Express
stock is undervalued and does not fully reflect the performance
of Shearson, according to analysts.
    Yesterday, Shearson said it was elevating its chief
operating officer, Jeffery Lane, to the added position of
president, which had been vacant. It also created four new
positions for chairmen of its operating divisions.
    Analysts speculated a partial spinoff would make most
sense, contrary to one variation on market rumors of a total
spinoff.
    Some analysts, however, disagreed that any spinoff of
Shearson would be good since it is a strong profit center for
American Express, contributing about 20 pct of earnings last
year.
    "I think it is highly unlikely that American Express is
going to sell shearson," said Perrin Long of Lipper Analytical.
He questioned what would be a better investment than "a very
profitable securities firm."
    Several analysts said American Express is not in need of
cash, which might be the only reason to sell a part of a strong
asset.
    But others believe the company could very well of
considered the option of spinning out part of Shearson, and one
rumor suggests selling about 20 pct of it in the market.
    Larry Eckenfelder of Prudential-Bache Securities said he
believes American Express could have considered a partial
spinoff in the past.
    "Shearson being as profitable as it is would have fetched a
big premium in the market place. Shearson's book value is in
the 1.4 mln dlr range. Shearson in the market place would
probably be worth three to 3.5 bilion dlrs in terms of market
capitalization," said Eckenfelder.
    Some analysts said American Express could use capital since
it plans to expand globally.
    "They have enormous internal growth plans that takes
capital. You want your stock to reflect realistic valuations to
enhance your ability to make all kinds of endeavors down the
road," said E.F. Hutton Group analyst Michael Lewis.
    "They've outlined the fact that they're investing heavily
in the future, which goes heavily into the international
arena," said Lewis. "...That does not preclude acquisitions and
divestitures along the way," he said.
    Lewis said if American Express reduced its exposure to the
brokerage business by selling part of shearson, its stock might
better reflect other assets, such as the travel related
services business.
    "It could find its true water mark with a lesser exposure
to brokerage. The value of the other components could command a
higher multiple because they constitute a higher percentage of
the total operating earnings of the company," he said.
     Lewis said Shearson contributed 316 mln in after-tax
operating earnings, up from about 200 mln dlrs in 1985.
   
 Reuter
