Dean Witter Reynolds Inc., the nation's fifth biggest brokerage firm, is a target for takeover, perhaps by Sears Roebuck & Co., Wall Street sources said today.
Dean Witter would neither confirm nor deny that another company has made a bid for it, but the brokerage firm did ask to have trading in its stock halted and called a special meeting of its board of directors for noon Thursday.
A Sears spokesman would neither confirm nor deny the takeover rumors. Sears is the nation's biggest retailer. On Monday Sears announced that it had reached an agreement in principle to buy Coldwell Banker & Co., the nation's biggest independent real estate firm.
Sears is determined to become a major factor in the financial services industry. It already owns a major insurance company, Allstate, and a big California savings and loan association, and has announced plans to offer a money market mutual fund. Its far-flung network of retail outlets and its millions of credit card customers would give Sears a huge base from which to build a financial services empire.
Some Wall Street traders said they thought Connecticut General Life Insurance Co. was Dean Witter's suitor. A spokesman for Connecticut General would not comment on the reports.
If Dean Witter is acquired by another company -- an eventuality Dean Witter management might find unpalatable but unavoidable -- it would be the fifth major Wall Street firm to be acquired this year by companies seeking to broaden the types of financial services they can offer their customers.
The Bache Group Inc., the nation's sixth-biggest broker, was acquired by Prudential Insurance Co., the country's biggest insurer. Shearson Loeb Rhoades Inc., the second biggest company in the industry, was bought by American Express Co. Salomon Brothers, the big investment banking partnership, was bought out by Phibro Corp., the commodities trading firm, while an arm of the Bechtel family, which controls a giant-sized San Francisco engineering and construction firm, took control of Dillon, Read & Co.
Executives at Dean Witter said they had no firm knowledge of who is making a bid for the company, which had $274 million of capital at the end of last year. "I've heard at least three names in the rumor mill: Sears, Connecticut General and Aetna," said one executive. A spokesman for Aetna Life & Casualty Co. said Aetna had not made an offer for Dean Witter.
"On a scale of one to 10, I'd make it eight-and-a-half to nine that it is Sears," said a major arbitrage trader who makes his living buying and selling stocks that are takeover candidates. He said the most likely price for Dean Witter stock is $51 a share.
Dean Witter closed Tuesday at $35.25 a share. As often happens when takeovers are imminent, however, word that the company was a target leaked out and heavy trading ensued in Dean Witter stock on Monday and Tuesday.
On Friday, the stock closed at $25.875 a share and 42,800 shares were traded. Monday the stock rose $3.75 and trading volume increased to 155,300. Tuesday the price climbed by another $5.875 a share and the number of shares traded skyrocketed to 259,100.
A Dean Witter spokesman said the company would have an announcement after its board meeting Thursday.