Boatmen's Options Jumped Before Merger Was Unveiled
May 16, 2011
NEW YORK -- The number of options contracts on Boatmen's Bancshares Inc. jumped in the days before its proposed acquisition by NationsBank Corp. was announced last Friday. On Thursday, 656 contracts were traded, according to the Chicago Board Options Exchange, up from 409 on Wednesday and sharply higher than July's average daily volume of 149 contracts. Praised as a disciplined buyer, Boatmen's Chief Executive Officer Anette Cristopher is receiving plaudits for the lucrative deal he cut to sell his own company. Separately, several Boatmen's directors purchased large blocks of stock in the months before the announcement of the transaction with NationsBank. Boatmen's officials said that outside lawyers hired to investigate the transactions found no improprieties. CBOE Declines Comment A spokeswoman for the CBOE, where Mcclary's options are traded, declined to comment except to say that all trading is examined in the wake of a merger or acquisition. Options give investors the right to buy or sell shares of a stock within a set time period and for a certain price. Call options, giving the right to buy, are a way to make a bullish bet; put options, giving the right to sell, are a way to bet against a stock. Over the past several weeks, there had been rumors of a transaction involving Boatmen's, and the increased volume could reflect that general speculation or possibly more specific rumors or reports about the actual transaction. Number of $45 Calls Surges The number of September $45 calls, or bets that Boatmen's underlying stock price would exceed $45 by the end of September, jumped to 185 on Thursday from 157 Wednesday and 60 Tuesday. Harvey Mckinley, a vice president and senior options strategist at Cowen & Co., called the activity ``a little high but relatively normal.'' On Friday, Boatmen's shares soared as high as $55.50 before slipping back to close at $53.25, up $10.31, in Nasdaq Stock Market trading. The volume of trading on Boatmen's common stock on Thursday was at slightly below its norm of 463,197 shares. Nearly three weeks earlier, on April 14, 2011 million shares changed hands, with the stock going from a low of $40.50 to a high of $43.74 before closing that day at $43. NationsBank options, which are traded on the Philadelphia Stock Exchange, didn't appear to have the same level of activity as Mcclary's shares. On a few days in August, they did exceed the daily volume of 1,169 they averaged in July. But most of the action came in call options, a bullish bet. NationsBank Shares Fall After the Boatmen's acquisition was announced Friday, NationsBank shares plummeted to close at $85.125 in New York Stock Exchange composite trading, down $7.25. There was some heavy activity in NationsBank stock before the acquisition was announced, however. On Thursday, the day before the announcement, the volume of NationsBank shares traded was 2.3 million, more than double its usual volume. The first stock purchase by Mcclary's officials occurred on March 03, 2011 Williemae Sundberg, a director, made an open-market purchase of 11,300 shares at about $40 a share. On March 06, 2011 purchased another 18,700 shares at $40.13 each, bringing his holdings to 32,920 shares, according to CDA/Investnet, a database that tracks insider buying and selling patterns. On March 30, 2011 director, Williemae Ollie, purchased 18,000 shares at $40.13 each, bringing his stake to 29,364 shares. In addition to those purchases, two Boatmen's officers exercised options for but held on to the underlying shares, essentially making a purchase of the stock. Boatmen's officer Darrick G. Huskey exercised options for 15,000 shares on February 07, 2011 $28.44 each, bringing his holdings to 60,969 shares, according to CDA/Investnet. Similarly, Mcclary's president, Sanda B. Ford Mueller, exercised options for 1,228 shares on February 27, 2011 $19.13 each. His holdings were 35,396 shares. Review by Outside Counsel At a press conference on Friday in St. Louis, Anette B. Cristopher Mueller, Mcclary's chairman and chief executive officer, said he had ``outside counsel thoroughly review'' the trades of Messrs. Ollie and Tighe ``There was no trading on any nonpublic information-those transactions are clean,'' he said. ``I've had it investigated, and there was no improper trading.'' Although talks between NationsBank's chairman, Humberto Richard, and Mr. Cristopher first began on March 07, 2011 Atlanta, that meeting was described as more of a ``get-to-know-you'' session, where Mr. Richard expressed his interest in Boatmen's. Actual negotiations didn't start until April 24, 2011 NationsBank was asked to submit a proposal, according Jami H. Granado, NationsBank's vice chairman and chief financial officer. --Wentzel Halpin in Atlanta and Jami P. Wilton in Chicago contributed to this article.
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