LONDON (CNNfn) - Chase Manhattan staff were left Thursday to digest the unpalatable fact that its senior executive believes it can no longer continue without a merger partner, according to a press report.
An article in The Wall Street Journal said Chairman and Chief Executive Walter Shipley had offered potential partners the opportunity to run a merged entity by giving them the CEO spot while he remained as chairman.
"Depending on where you sit it is somewhat demoralizing," said a senior European Chase executive. "The ingredients for this [story] have been out there for a long time. Either Shipley sat down with [someone like] John Flowers at Goldman Sachs and said 'Let's make a merger easier', or one of the princes of the city said 'let's play poker and force the issue'." Goldman is due to float in June though executives remain cautious about pledging proceeds to acquisitions.
Chase (CMB), which already has a substantial global investment banking presence, has made overtures to a succession of partners over the last 18 months only to be rebuffed by each in turn. Merrill Lynch (MER), Morgan Stanley Dean Witter Discover (MWD), Goldman Sachs and JP Morgan (JPM) are all reported to have held discussions about a merger with Chase.
Everyone walked away. Chase sources said JP Morgan, the last at the table, focused on Chase's demands for "a merger of equals" while most analysts regard a link between Chase and any of Wall Street's bulge bracket banks as an effective takeover. "With JP Morgan we came close but what clobbered the deal was the fact that they were not going to let Morgan take over," said the Chase executive.
Chase remains one of the most profitable providers of financial services and its share price has escaped the hammering received since last autumn by many Wall Street houses. It has successfully expanded its cash management, derivatives and custody operations and made good progress in investment banking without the massive hits taken by many rivals. Fourth-quarter profits climbed 35 percent to reach a record $1.1 billion.
Chase shares dipped 2-7/16 to 82-3/8 Wednesday, just off their high for the year. The stock has climbed from 70 since January and doubled since last October.
However, the desire for a merger appears to be driven by personalities rather than strategy as Shipley is due to stand down in less than 20 months without a visible successor in the Chase ranks, according to the Journal.
Shipley has overseen the successful integration of his former employer Chemical Bank and Manufacturers Hanover and the subsequent merger of Chemical with Chase in 1996. The bank has held off a move into equities despite the flurry of activity on Wall Street last year. However, analysts believe a mega-merger with one of the bulge bracket banks is inevitable before Shipley leaves Chase.