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Quotron Weighs Citicorp Offer : Analysts Cheer Bid; Firm Cites Regulators' Concerns

March 20, 1986|BILL SING | Times Staff Writer

Quotron Systems Chairman Milton E. Mohr said Wednesday that concerns about regulatory approval and customer relations could prompt the financial information company to take at least a week before deciding whether to approve Citicorp's $680-million merger offer.

But, although Quotron officials plan to take their time in considering the $19-a-share offer that was announced Tuesday, analysts gave it a resounding endorsement.

While the price could be higher, there is little doubt that the potential combination would be a giant strategic leap forward for both firms, analysts said.

"The strategic fit is impeccable," said Osman Eralp, technology analyst at the San Francisco investment firm of Hambrecht & Quist. "Citicorp has tons and tons of unharnessed technologies, while Quotron has a bunch of people who know how to sell and integrate and package technologies."

For Los Angeles-based Quotron, already a leading supplier of computerized stock quotations and other electronic financial information, the merger would offer greater financial resources and customer contacts for expansion into new products and markets.

Citicorp officials have said that they would have a newly acquired Quotron make a major push overseas. Citicorp's operations in about 110 foreign coun tries would provide a ready customer base. Quotron also could expand beyond its traditional stock quotation services into such fields as government securities and foreign exchange trading.

For New York-based Citicorp, the nation's largest banking firm, the acquisition would be one of its largest and by far its biggest and boldest step into the fast-growing information services field, where it already has ventures in software, videotext for home banking and computer services for commodities traders.

The bank long has designated electronic delivery of financial information as one of its five major growth areas, along with insurance and investment, institutional and consumer banking.

The step also has implications throughout the financial services and technology industries. As one of the largest forays by a U.S. bank outside traditional banking operations, the move--if approved by the Federal Reserve Board--could further break down regulatory barriers for banks to enter new fields. The move also could accelerate moves into computerized information services by other firms, including American Express, Merrill Lynch and AT&T.

Analysts did not rule out the possibility that other financial giants might try to top Citicorp's offer or that Quotron would hold out for a higher price.

In over-the-counter trading Wednesday, Quotron's stock price rose $2.50 a share to $18.75. Citicorp rose 87.5 cents to $59.75 on the New York Stock Exchange.

Analysts also did not eliminate the possibility that the deal might be nixed by Quotron. Officials of the Los Angeles firm have voiced concern that a Citicorp combination could jeopardize Quotron's existing relations with customers.

These customers--which include most major brokerage houses, some banks and other financial service firms--might not want Citicorp to have access to their trading information and other business plans, Quotron officials fear.

Such concerns, in fact, contributed to the breaking off of merger talks last fall between Quotron and Citicorp, Quotron Chairman Mohr said Wednesday in an interview.

"I don't know if it's a severe problem, but it's a potential problem," said Mohr, who also is chief executive.

A Citicorp spokesman, however, minimized the problem, noting that many financial services firms are customers and suppliers for each other. He noted that Merrill Lynch underwrites Citicorp's securities, "but we don't think they use the information they gain about us (through underwriting) to our competitive disadvantage."

In making the offer, Citicorp Chairman John S. Reed said Tuesday that he hoped Quotron would respond sometime next week. But Mohr said Quotron may not be able to act that quickly. The firm's board probably will not meet until sometime next week, he said, and even then the directors will not be ready to decide.

"A lot of things need to be done," Mohr said, adding that the firm might not want to make its decision until Citicorp wins regulatory approval, a process that could take at least four weeks. Mohr refused to comment on whether he thought the offered price is fair. He said the offer was "a complete surprise."

The offer comes at a time when Quotron appears to be reversing an 18% earnings decline last year.

The decline was caused in part by high development costs on a new computer system called the Quotron 1000. But the bulk of those costs "are largely behind us," Mohr said, and heavy stock trading volume is boosting demand for Quotron terminals.

Quotron also appears to be maintaining its 60% to 65% market share despite mounting competition, said analyst Joseph A. Rugilio of the brokerage firm of Dean Witter Reynolds. The chief competitive threat is a joint venture between Merrill Lynch and IBM to develop a computer stock-quotation service similar to Quotron's.

But Quotron has been busy developing joint ventures of its own. For example, it plansto market an advanced new financial information system with AT&T.

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