CIT Group Inc. (NYSE: CIT) is almost hard to fathom as a takeover stock, regardless of a report that SunTrust Robinson Humphrey thinks it would be a good takeover target for Wells Fargo & Co. (NYSE: WFC). The report signals that this would be a supposition on an ‘if, then’ basis, so don’t even chalk this up as a rumor.
As we always admit, anything is possible and the motivation of greed can often dwarf shareholder need. Our take… Wells Fargo would be silly stupid to acquire CIT even if CIT is now back to a relevant company again that serves an often underserved niche. What the value is depends upon whom you ask, but would the regulatory bodies even allow a large bank to do a deal like this in today’s climate? Valuations are far from cheap even if it is still a post-bankruptcy reorganization name and even if the $35.50 CIT share price compares to a 52-week trading range of $27.68 to $49.57.
We will give a hat tip to SunTrust if this ever manages to come about, but acquiring legacy operations that pre-date the implosion of the recession is something that many banks still want to avoid. The PR might just be too negative even if it makes financial sense. Just ask CEO Moynihan at Bank of America Corporation (NYSE: BAC) how much he enjoys the nightmare left over from the firm’s Countrywide acquisition before he took over. These two situations are extremely different so don’t draw too much from the comparison… Don’t ignore it entirely either.
Anyone buying CIT should do so because of its massive footprint serving businesses that the banking sector has left behind rather than it being a takeover target.
JON C. OGG
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