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Dresdner buys Wasserstein
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September 18, 2000: 8:25 a.m. ET
German bank to pay $1.4B stock for New York investment firm, $190M to keep staff
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LONDON (CNNfn) - Germany's Dresdner Bank AG confirmed Monday it was joining the stampede of European banks into Wall Street's inner circle, agreeing to buy New York merger and acquisition adviser Wasserstein Perella & Co. for about $1.4 billion in stock.
The No. 3 bank in Germany followed Swiss rivals UBS AG and Credit Suisse Group in deciding that to compete better in investment banking, it needed to swallow an established U.S. player. Its move, though, is far smaller than both Credit Suisse's $13.4 billion purchase of Donaldson, Lufkin & Jenrette Inc. (DLJ: Research, Estimates), announced in August, and UBS's $15.8 billion deal the previous month to acquire Paine Webber Group Inc. (PWJ: Research, Estimates).
However, buying Wasserstein holds out the promise of spicing up Dresdner's investment banking growth. The U.S. firm, which is also the third-largest trader in the U.S. high-yield debt market, has been expanding at an average rate of 30 percent in recent years, said Dresdner, and expects 2000 to be its best ever business year with annual revenue rising to $400 million.
"This transaction, which gives us a strong position in the US advisory  business, will enhance the global profile of our investment bank," Dresdner Chief Executive Bernd Fahrholz said in a statement.
Frankfurt-based Dresdner said it will combine Wasserstein with its London investment banking unit Dresdner Kleinwort Benson, naming the new division Dresdner Kleinwort Wasserstein.
The enlarged investment bank would have ranked No. 6 in global mergers and acquisitions for the first eight months of 2000, Dresdner said. Wasserstein by itself was the fifth-ranked M&A adviser in the U.S. in the first half of the year. It is advising entertainment and media conglomerate Time Warner Inc. (TWX: Research, Estimates), the parent of CNNfn.com, on its proposed merger with Internet powerhouse America Online Inc. (AOL: Research, Estimates).
"The creation of Dresdner Kleinwort Wasserstein is only the beginning of the next phase of development, in what will be even more fulfilling times for all employees of the merged investment bank," said Wasserstein Perella Chairman Bruce Wasserstein.
Loyalty bonuses
Dresdner said it had set aside $190 million to pay bonuses to keep staff from leaving in the wake of the merger.
The German bank has failed in two attempts this year to merge with domestic rivals, first with Deutsche Bank AG (FDBK) and then Commerzbank AG (FCBK). Its shares were down 2.6 percent to  46.65 on the Frankfurt Stock Exchange at midday Monday following the announcement.
A succession of high-profile Wall Street firms have agreed in recent weeks to give up their independence to deep-pocketed global banks. In addition to PaineWebber's agreement to become part of UBS, venerable investment bank J.P. Morgan & Co. (JPM: Research, Estimates) last week said it was selling control to Chase Manhattan Corp. (CMB: Research, Estimates) in a $33 billion stock deal.
Pending regulatory approval, Dresdner's purchase of Wasserstein is expected to close in the fourth quarter. Dresdner won't acquire Wasserstein's private equity business, which will be spun off to the U.S. firm's existing shareholders. 
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