on Friday said it completed the sale of its international banking subsidiary in a deal that could ultimately be worth as much as $1.1 billion.
The New York-based credit card company will receive $300 million for the sale of
American Express Bank Limited
, plus the net asset value of AEBL on the closing date, bringing the deal to approximately $823 million.
Eighteen months after the close of the deal, Standard Chartered will enter into a put/call agreement for the AEBL subsidiary
American Express International Depository Co.
, which issues investment certificates for the international bank. Under this arrangement, American Express can sell and Standard Chartered can buy AEIDC. The net value of this part of the deal is roughly $232 million bringing the total value of the transaction to $1.1 billion.
The transaction was announced in September of 2007, just one month after a different subsidiary of AEBL, American Express Bank International, entered into a settlement with the Justice Department relating to customer accounts and anti-money laundering compliance programs. The parent company has paid a total of $65 million for the settlement and of the amount paid; $60 million is attributable to the issues involving AEBI.
American Express shares recently were crumbling 4.1% to $42.60, but that may well have to do with some negative sentiment from analysts following a warning from the company in its 10-K Thursday.
"If we are not successful in increasing consumer and business spending or in managing the costs of our cardmember benefits, our revenues and profitability could be negatively affected," the company said in the filing.
On Friday, Argus Research analyst David Ritter cut his estimate for American Express from to $3.55 from $3.70. "
American Express' more cautious outlook for 2008 does not seem to assume a recession in the U.S. economy," Ritter said. "As such, we believe that its 10% to 12% forecast for growth in operating EPS may be too high." Ritter reiterated his price target of $60 and maintains a buy rating on the stock.
Goldman Sachs analyst James Fotheringham also on Thursday cut his annual estimates to $3.25, a 4% decrease, and dropped the price target from $55 to $53. "We still believe that 2008 guidance is too optimistic," Fotheringham wrote. "We assume growth in card billed business will fall to 3% in 2008." He has a neutral rating on the stock.