After Bank of America (BAC ) acquired credit-card lender MBNA (KRB ) in mid-July, other banks started looking for acquisitions. One target: Advanta (ADVNB ) (ADVNB), No. 3 in small-business credit cards, whose stock rose from 28 to 31 after the MBNA deal. Advanta, now at 26, is worth 33 to 35 in a buyout, says one New York hedge-fund pro close to one of two banks eyeing Advanta. He did not want to be named. Advanta declined comment. CEO Dennis Alter and family control 40% of the A voting shares. Citigroup (C ) tops the Visa-MasterCard market for small business, with a 20% share. Wells Fargo (WFC ) has 17%; Advanta 14%. Scott Valentin of Friedman, Billings, Ramsey rates Advanta "outperform." Should it become a takeover target, "we would value it in the low-to-mid 30s," he says. After a strong third quarter, he raised his 2006 earning estimate by 9 cents, to $2.25 a share. His 2005 estimate stays at $1.93.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial