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Weill: Salomon a good fit
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September 24, 1997: 9:00 p.m. ET
Travelers' chief says brokerage made a good turnaround after 1990s turmoil
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NEW YORK (CNNfn) - Travelers Group Inc. Chief Executive Sanford Weill said his company eyed Salomon Inc. for a $9 billion acquisition because the two businesses fill out each other's shortcomings.
Weill said Travelers' Smith Barney, whose business is predominantly U.S.-based, would gain an entree into the lucrative, emerging global marketplace through Salomon Brothers.
"The companies really fit," Weill told Moneyline with Lou Dobbs. "[Salomon's] strengths are where Smith Barney is not strong and Smith Barney's strengths are where Salomon is not strong."
News of the mega-merger stunned Wall Street Wednesday. Under terms of the deal, Travelers will issue 1.13 of its share for each Salomon issue.
Travelers sells insurance, mutual funds and other financial services, while Salomon is a major brokerage house. The pairing creates a powerhouse with $55 billion market capitalization.
It also is the second-largest brokerage-investment banking deal this year, trailing only the $10.5 billion marriage of Morgan Stanley and Dean Witter in February.
Part of Salomon's appeal is its strong footing in international markets. Weill sees big growth in eastern Europe, Russia, Asia, Latin America and the Middle East as governments privatize national industries. (218K WAV) or (218K AIFF)
"Now we will have that global platform," Weill said. "That's where the change is happening in financial services."
Travelers will merge Smith Barney with Salomon Brothers and rename the unit Salomon Smith Barney Holdings Inc.
Deryck Maughan, chief executive at Salomon, will become co-chief of the joined brokerage along with James Dimon, the chief executive of Smith Barney.
"I think Deryck and Jamie have different talents and different experiences, and I think they both can learn from each other," Weill said. "I think they're going to create a fantastic team."
Weill said part of Salomon's appeal is its sharp turnaround under Maughan's leadership after a string of problems in the early 1990s. (128K WAV) or (128K AIFF)
"Deryck has done a fantastic job in really stabilizing Salomon," Weill said.
Salomon was king of Wall Street in the 1980s until it fell from grace in 1991 when the firm submitted fake bids for government securities auctions. Then-chairman John Gutfreund, who delayed in reporting the matter to authorities, stepped down.
Salomon's woes deepened when it lost nearly $400 million, mostly from bond trading, after a string of interest rate hikes.
Investment guru Warren Buffett stepped in as interim chairman and then tapped Maughan to take the helm.
Maughan is credited with putting a stop to infighting by shrinking Salomon's operating committee. He's also been praised for quickly building the firm into a global powerhouse by boosting its stock and debt underwriting and mergers and acquisitions businesses.
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