Dear Fred: And CMB had the last laugh:
"LOL---- JP Morgan downgraded Chase to an "accumulate" from a "buy"."
What does a company like CMB do if it does not like the way a brokerage firm covers it? Take it out!
Tuesday September 12, 9:09 pm Eastern Time
Chase in talks to buy J.P. Morgan-source
(UPDATE: adds analyst comment, background)
By Mary Kelleher
NEW YORK, Sept 12 (Reuters) - Chase Manhattan Corp. (NYSE:CMB -
news), the No. 3 U.S. bank holding company, is in serious talks to buy
leading commercial and investment bank J.P. Morgan & Co. Inc.
(NYSE:JPM - news), to fortify its securities businesses in a rapidly
consolidating industry, a source close to the deal said on Tuesday.
A deal, which analysts have estimated could be worth as much $35
billion, or $210 to $220 per J.P. Morgan share, would rank as one of the largest in the U.S. financial
services industry and create a global banking powerhouse. It could be announced as soon as early
Wednesday morning. The source said the boards were meeting on Tuesday.
Chase and J.P. Morgan spokesman declined to comment.
The possible acquisition would propel Chase, traditionally a commercial bank, toward its
long-stated aim of joining the ranks of top Wall Street investment banks like Merrill Lynch and Co.
Inc. (NYSE:MER - news) and Goldman Sachs Group Inc. (NYSE:GS - news), and also follows a
spate of industry mergers.
J.P. Morgan, the nation's fifth-biggest bank holding company, has been under pressure to do a deal
because it risks being left behind as the world's biggest banks merge with each other and leave a
small number of global financial players.
The New York-based bank -- whose founder played a pivotal role in saving the U.S. government
from financial panic in the early 1900s -- has not done a major deal since it merged with Guaranty
Trust Co. of New York in 1959. It has stood by, proclaiming its independence, as a string of
European banks quickly snapped up its U.S. rivals.
By contrast, Chase has been building its securities business with acquisitions, including the purchase
of West Coast investment bank Hambrecht & Quist and British money manager and investment bank
Robert Fleming Holdings.
``It would be an enormously powerful organisation,'' Robert Alberton, a former analyst who now
runs investment firm Pilot Financial, said of a combination. ``People worry about cultural
differences but today both banks are more like investment banks than commercial banks. Chase has
proven itself to be a sophisticated and creative acquiror of investment banks.''
Employees leaving J.P. Morgan's headquarters on 60 Wall Street told Reuters they were told to
expect an announcement about a merger late Tuesday or on Wednesday morning. Senior executives
told one support staffer Chase was the buyer.
``We're going to get money out of them either way,'' a tech consultant who works for J.P. Morgan,
said of a prospective buyer. ``I'm not worried.''
The New York Times first reported the story on its Web site. Exact details of the deal were not yet
available.
``The rumour is $210 a (J.P. Morgan) share,'' Steven Eisman, an analyst at CIBC World Markets,
said.
But the deal might also mean large job cuts and still might not make Chase large enough in several
key securities businesses where it is eager to expand, such as helping companies with new stock
offerings, Lawrence Cohn, an analyst at Ryan, Beck & Co., said.
``I have a hard time following the logic behind this deal,'' Cohn said. ``There is a huge amount of
redundancy between the two companies, which means when they combine they are unlikely to hold
on to their revenues. One business where I think that will be especially clear is in the derivatives
business -- they are the two largest derivatives dealers in the world.''
The combined bank would rank 7th among firms engaged in the lucrative business of advising U.S.
companies on merger deals, ranking behind Wasserstein Perella Group and Goldman, as well CS
First Boston and DLJ, based on data from Thomson Financial Securities Data.
In terms of new U.S. stock offering deals, based on data so far this year, the merged bank also would
still badly lag rivals like Goldman, Merrill and Morgan Stanley Dean Witter & Co. (NYSE:MWD -
news).
Chase's stock fell $1-7/16 to close at $56-1/16 while shares of J.P. Morgan, one of the 30
companies making up the benchmark Dow Jones Industrial average, rose $8-3/4 to close at
$177-3/4. Earlier on Tuesday, they hit a record high of $180 on the New York Stock Exchange after
J.P. Morgan Chief Executive Douglas Warner cancelled an appearance at a Merrill Lynch
conference on Tuesday.
In after-hours trading on the Instinet electronic trading system, J.P. Morgan's stock shot up still more
to $184-7/8 while Chase's fell to $52-1/4.
J.P. Morgan, one of the oldest U.S. banks with some $266 billion in assets, has been a
long-rumoured takeover target for its lucrative money management unit, world famous brand name,
long list of corporate customers, and global reach.
Its name was tied to Germany's Deutsche Bank in the rumour mill. The bank itself also appeared to
be losing confidence in its ability to go it alone, and held talks to buy Donaldson Lufkin & Jenrette
(NYSE:DLJ - news) before Credit Suisse Group bought DLJ. Further fuelling takeover rumblings, its
chief financial officer, Peter Hancock, also quit last week.
The talks between Chase and J.P. Morgan follow a blitz of mergers in the financial industry which
many say have put the heat on the remaining Wall Street firms to strike a deal to compete.
Switzerland's UBS AG recently announced plans to buy Wall Street brokerage PaineWebber Group
Inc. (NYSE:PWJ - news), and the CS First Boston-DLJ came shortly after.
Chase has made no secret of its desire to expand its business of advising companies on mergers and
helping with new stock and bond offering deals.
In the last two years, Chase made a series of purchases, including investment banking boutique
Beacon Group to build up its mergers and acquisition advisory business and corporate finance arm.
In recent years, it also made unsuccessful overtures to Wall Street firms like Merrill.
biz.yahoo.com
Regards,
Lynn |
