Bruno's Could Protest Too Much

Where there's smoke, there's fire. Some investors think that cliche may hold true for Bruno's, which operates 257 supermarkets in the Southeast. "Bruno's stock is about to catch fire," says a New York money manager, who believes a big food chain is considering a bid for the Birmingham (Ala.) company. Recently, industry takeover chitchat has had the shares seesawing between 7 and 93/4.

On Sept. 12, the company strongly denied any such possibility, causing the stock to dip from 93/4 to 87/8. But by Sept. 13, the stock was again on the rise, trading at 9 on heavy volume.

What's really going on? Analysts are nearly unanimous in pooh-poohing takeover rumors. "I'm convinced by management's categorical denial, and I don't think the rumors are true," says Kay Norwood of Interstate/Johnson Lane. She has a "hold" recommendation on the stock. She thinks that, based on Bruno's lackluster fundamentals, the jump was unjustified.

But one big investor thinks the analysts are wrong--and insists Bruno's claim that nothing is going on means that "any takeover move will be hostile." This pro, who puts the buyout value of Bruno's at $20 a share, thinks the company eyeballing Bruno's wants to bolster its presence in the Southeast, where Bruno's supermarkets--including Piggly Wiggly, Food World, and Food Max--have a major presence. Sales totaled $2.8 billion in the year ending June 30, 1994, and are expected to hit $2.9 billion this year. Norwood figures Bruno's will earn 55 cents in the year ending June 30, 1995, up from 52 cents in 1994.