- The short answer, according to BAML's Kenneth Bruce and Charlie Pratt: There's "no hidden value in the sum-of-the-parts."
- After activist investor ValueAct purchased $1B of American Express (AXP -0.4%), discussions have centered on the disposition of the Global Merchant Services business, but the BofA due believe this would actually reduce shareholder value.
- The closed-loop model of AmEx works best, they say, and valuations of both the network and merchant acquiring businesses should be discounted to reflect their competitive disadvantages outside of the closed-loop.
- The team's own sum-of-the-parts analysis valued AmEx at just $75 per share vs. $84 for the current model. "American Express’s value proposition is built around the closed-loop and abandoning it in the face of a difficult operating backdrop seems counter-productive."
- The team maintains an Underperform rating on the stock.
- Source: Barron's