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Chase to buy J.P. Morgan?
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September 12, 2000: 7:50 p.m. ET
Bank in advanced talks to be bought by Chase; deal possible Wednesday
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NEW YORK (CNNfn) - Chase Manhattan Bank is in talks to acquire J.P. Morgan for $30 billion and a deal could come as soon as Wednesday, published reports said Tuesday.
Reports of the transaction caused shares of J.P. Morgan to jump late Tuesday. After the close of the trading day, J.P. Morgan (JPM: Research, Estimates) gained $7.50 to $185.50, while Chase Manhattan Bank (CMB: Research, Estimates) lost $1.75 to $52.75.
J.P. Morgan declined to comment on the report. Chase also declined comment.
 New York-based J.P. Morgan topped many analysts' lists as the next bank to be acquired by a financial institution, after Credit Suisse First Boston's $11.5 billion purchase of DLJ (DLJ: Research, Estimates), announced Aug. 30, and UBS' $12 billion acquisition of PaineWebber announced in July. On September 6, Citigroup (C: Research, Estimates) also acquired Associates First Capital Corp. (AFS: Research, Estimates), the No. 1 U.S. consumer finance company, for about $31 billion in stock.
Chase may pay as much as $210 or $220 a share for J.P. Morgan, Reuters reported, while the FT.com said the purchase could come to around $200 a share. The Wall Street Journal pegs a deal at $30 billion.
Falling behind
J.P. Morgan, the nation's fifth-biggest bank holding company, has been the subject of intense merger speculation since Credit Suisse bought DLJ in August.
If consummated, Chase's purchase of J.P. Morgan would end the independence of one of the most prestigious banks in Wall Street history. But in the last few years, the company has lost ground to rivals such as Citigroup and Morgan Stanley Dean Witter (MWD: Research, Estimates).
A series of events in the last week have fueled rumors of an acquisition. J.P. Morgan's CEO Douglas Warner canceled an appearance Tuesday at a Merrill Lynch conference on Tuesday. On September 8, J.P. Morgan's chief financial officer, Peter Hancock, resigned and was replaced by Thomas Ketchum, Morgan's chief administrative officer.
"If consummated, the deal would fit better than other deals that have been proposed," said analyst Mark Constant, of Lehman Brothers. Chase's strengths in high yield and as a technology boutique would fit well with Hambrecht & Quist, which is a specialty underwriter of high-tech initial public offerings.
However, Constant noted that any time two firms merge the combined company has to deal with departures and the loss of clients.
"Anytime put two firms together where there is overlap there are certain execution risks," he said.
A moderate premium over J.P. Morgan's recent stock price would be good for Chase shareholders, said Bernstein analyst Ron Mandle.
"Strategically it's a good fit because they fit each other's niches," he said. "Chase fills up Morgan's equity business and European business."
For the first half of 2000, J.P. Morgan ranked fifth in completed worldwide mergers and acquisitions and sixth among U.S. lead equity underwriters, according to data from Thomson Financial. J.P. Morgan has 16,000 employees with offices in the United States, and overseas, including London, Tokyo, Sao Paulo, Brazil, and Sydney, Australia.
Investment banking rivals include Goldman Sachs Group Inc. (GS: Research, Estimates), Merrill Lynch (MER: Research, Estimates) and Morgan Stanley Dean Witter. J.P. Morgan also competes against Chase and Citigroup in commercial and private banking, as well as asset management.
Another addition for Chase?
New York-based Chase Manhattan Bank reported operating revenue of $5.8 billion and net income of $1.09 billion in its most recent quarter. The bank has assets in excess of $396 billion.
In the past two years, Chase has bought investment bank Hambrecht & Quist to bolster its underwriting arm, as well as investment banking boutique Beacon Group and investment bank Robert Fleming Holdings.
German's Deutsche Bank has also been linked to J.P. Morgan.
Employees leaving J.P. Morgan's headquarters on 60 Wall Street in New York City told Reuters Tuesday they were delighted the bank was getting bought out by larger rival Chase.
"I hope I get fired as a result of the merger," one young woman told Reuters. "I'll get a fat severance package and go to grad school."
Employees were told to expect an announcement about the merger late Tuesday or Wednesday morning, Reuters said. Other employees said management had not been up front with the merger talks.
"We're always the last to know anything," one supervisor said. 
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