Rumor Mill Turns to CIT Buyout or Sale

This would mark a serious change of fate if there is truth to the report. CIT Group Inc. (NYSE: CIT) went belly up after the recession. Since emerging from bankruptcy under CEO John Thain, the share price is up handily from where shares were after exiting Chapter 11. Fox Business Network’s Charlie Gasparino has reportedly tweeted that Thain is seeking a buyer and that the sale efforts began at CIT after its unsuccessful bid to buy ING Direct.

Fox Business also has a report that Wells Fargo & Co. (NYSE: WFC) could be (or should be) the acquirer. We noted as long as a month ago that CIT Group was getting its borrowing costs lower and lower after new debt sales were going off at incredibly low interest rates which have lowered the company’s funding costs by as much as 250 basis points.

One aspect which may be helping is that CIT had lowered its long-term debt down to roughly $23.5 billion as of the end of the June quarter. That is nearly one-third lower from the end of 2010.

CIT shares have risen 3.5% to $40.33 so far on Monday and the shares have a 52-week range of $27.68 to $43.35. Shares are up 24% so far in 2012.

One thing is important to consider here in the new regulatory framework. It is unclear if the regulators would allow one of the “too big to fail” banks to make a large acquisition even if such an acquisition could easily be absorbed by such a large buyer. CIT’s market cap is only about $8 billion now.

JON C. OGG