|
Wall Street firms to merge
|
 |
February 5, 1997: 11:36 a.m. ET
$10 billion Morgan Stanley, Dean Witter deal signals consolidation
|
NEW YORK (CNNfn) - Wall Street titans Morgan Stanley Group Inc. and Dean Witter Discover & Co. said Wednesday they plan to merge in a stock swap valued at $10 billion that will create the largest securities firm in the nation.
The combined asset management operation of the new company -- to be called Morgan Stanley, Dean Witter, Discover & Co. -- will manage more than $270 billion, the largest of any securities firm, the companies said
The planned marriage of the two firms, which will have a market capitalization topping $21 billion, received initial accolades from the rest of the financial services community.
Analysts said the deal -- announced before the opening bell on Wall Street -- signaled the start of industry consolidation. Investment banks, brokerage houses, mutual funds and other arms of the financial world are gradually leaning toward combinations once believed as unlikely as blending oil and water, they said.
"I think it's a wonderful marriage," said David Elias of Elias Asset Management.
"I think this merger makes a lot of sense," added Tom Facciola, a brokerage analyst at Salomon Bros. "You have one of the largest institutional brokers combining with the third largest retail broker… It's corporate America meets Main Street."
Under terms of the tax-free agreement, each common share of Morgan Stanley stock will be exchanged for 1.65 Dean Witter shares. If approved by regulators, Dean Witter will control 55 percent of the stock and Morgan Stanley will control 45 percent.
Shares in Morgan Stanley were up 7-1/2 to 64-7/8 on the New York Stock Exchange at 11 a.m., with more than 2.78 million shares traded. Dean Witter also rose 1-1/2 to 40-1/8 on volume of 2.8 million shares.
The board of directors of the new Morgan Stanley, Dean Witter, Discover & Co. will be split evenly among the two firms. The combined company will also retain many of the current senior executives, with Dean Witter Chairman and Chief Executive Officer Philip J. Purcell serving as chairman and CEO after the merger and Morgan Stanley's President John J. Mack becoming president and chief operating officer.
The companies said did not say whether or where there might be any job cutbacks.
"The combination… is based on powerful franchises, high profitability and opportunities for accelerated growth," Purcell said. He added that merging Morgan Stanley's strength as a leading investment bank with a hand in mutual funds and Dean Witter's strength in retail brokering and credit-card services would be a perfect fit for Wall Street.
It could be an intimidating combination. Consider the combined credentials of Morgan Stanley and Dean Witter: market capitalization of $21 billion, $270 billion in assets under management, 9,000 brokers, a massive securities underwriting operation and 39 million holders of the Discover credit card.
"The financial services industry is entering an era of unprecedented convergence and consolidation," Mack said. "Those firms that want to control their own destinies in the next century must have leading market positions in all of their businesses, balanced earnings streams, broad-based customer access and a global presence."
Despite the rosy scenario, some observers questioned the blending of two firms whose business philosophies have sometimes appeared as divergent as flying first-class and coach. Investment banks are traditionally bastions for financial royalty, while retail brokers are more mainline.
Analyst Facciola dismissed such claims as out of step with changing times. "I think these are two smart managements, and while there's a need to mesh them, I don't think there's a need for one to overwhelm the other," he said. "One is a factory in terms of ability to generate deals… and the other is a distribution machine. So I think there is no need that they be completely meshed together."
-- David Rynecki
|
|
|
|
|
 |
|
