CREATING A WALL STREET GIANT : For Weill, It's Doubly Sweet Deal

In a Darwinian industry notorious for burning out executives and destroying weak firms, Sanford I. Weill has proven tremendously resilient. While other Wall Street chieftains and deal makers rose and fell, the 59-year-old Weill has continued to reshape the competitive landscape in the securities industry for three decades.

Though his profile had been lower than usual the last eight years, Weill on Friday staged a remarkable return to center stage. The chairman and chief executive of Primerica announced that its Smith Barney subsidiary will merge with the domestic retail brokerage and asset management businesses of Shearson Lehman Bros., an American Express subsidiary.

The $1-billion merger, which will create a powerful firm to rival industry leader Merrill Lynch, represents a personal victory for Weill, who built Shearson into a giant firm during the 1970s and '80s and has been seeking to grow Smith Barney into a Wall Street powerhouse in the 1990s.

Weill, known to many as Sandy, is described as possessing keen business savvy and strong leadership ability--traits highly needed, but not often found, in today's demanding and highly competitive brokerage business.

"I am struck by two sides of Weill," says Samuel B. Hayes, professor of investment banking at Harvard Business School. "He is both a deal maker and an operations manager. What sets him apart from the typical deal maker is that in the past he has been able to follow through on an operating plan to make a company profitable."

"Weill is effective because he knows the nuts and bolts of how to make money from running a retail-securities business," says Perrin H. Long Jr., director of equity research at First of Michigan Corp. and a longtime friend of Weill. "He has a very charming personality, which means that people will go the extra mile, work the extra hour for him. You need this in a people business such as brokerage."

Long described Weill as "a man you could walk down the darkest alley with and never have any fear he would stab you in the back, a Jewish boy from Brooklyn with tremendous integrity."

Weill, a native New Yorker who grew up on Bay Street in Brooklyn, played stickball and cheered for the New York Yankees baseball team as a youth. He married the former Joan Mosher in 1955, the year he joined Bear, Stearns as a $65-a-week clerk. In 1960, he and three friends formed a small firm called Carter, Berlind, Potoma & Weill.

Thirteen years and 13 mergers later, that fledgling operation had grown into a substantial brokerage, Hayden Stone, of which Weill was CEO. Weill had pieced it together from small firms that were floundering from the effects of a prolonged Wall Street slump. Along the way he gained a reputation as a skilled consolidator of operations and a no-frills cost-cutter.

Hayden Stone doubled in size when it acquired Shearson Hammill in 1974, then doubled again when it took over Loeb Rhoades in 1979 to form the No. 2 brokerage Shearson Loeb Rhoades.

Believing Shearson needed additional capital to survive Wall Street's ongoing consolidations, Weill sold the firm to American Express in 1981 for nearly $1 billion. His personal fortune ballooned by $30 million in American Express stock as a result of the transaction.

Two years later, Weill became president of American Express under then-Chairman James D. Robinson III. But he soon referred to his No. 2 position as "Deputy Dog." Unhappy, he resigned in 1985, only to re-emerge on Wall Street two years later when he acquired Primerica, an insurance company that owned Smith Barney.

In a drive to build Smith Barney into a top-tier player, Weill orchestrated the purchase of 16 retail offices from Drexel Burnham Lambert in 1989. But his expansionist strategy was stymied when he failed to buy Shearson's brokerage in 1990 or to acquire General Electric's Kidder Peabody brokerage unit last May.

Thus his success in crafting the merger announced Friday was doubly sweet.

In an interview, Weill said his strategy for the merged firm, to be called Smith Barney Shearson, will be "to provide the best products and service to that high-net-worth customer and to do it with the most efficient systems and technology."

He also said he aims to grow Smith Barney's investment banking and capital markets activity with help from Lehman Bros., American Express' investment-banking subsidiary, which is not part of the transaction.

In analyst Long's judgment, Wall Street competition won't be significantly altered by the merger. He points out that the largest firm, Merrill Lynch, has a sales force of about 12,000, while Smith Barney Shearson will field about 10,800 salespeople.

He notes that Smith Barney Shearson will focus primarily on servicing individual retail clients, while Merrill will continue to offer a broad range of financial services, such as underwriting new securities, serving institutional clients and competing in capital markets.

Harvard's Hayes predicts that, in the short term, Weill will take a couple of years to rationalize the Smith Barney Shearson operations. But over the long term, Hayes says, "I would be willing to bet that Weill will turn this group of brokerage-related operations into a very profitable and formidable competitor to Merrill Lynch."

Top 10 Brokerage Retail Sales Forces Primerica's acquisition of Shearson Lehman Bros.' retail brokerage arm will quadruple its retail sales force. The new firm formed by the combination of Primerica's Smith Barney unit and Shearson, to be known as Smith Barney Shearson, will give Primerica the second-largest retail brokerage sales force.

Registered retail sales Number of Brokerage representatives offices Merrill Lynch & Co. 11,600 510 Smith Barney Shearson 10,891 495* Dean Witter Reynolds 6,516 417 Prudential Securities 5,675 306 PaineWebber Group 4,607 266 A.G. Edwards 4,399 450 Edward D. Jones & Co. 1,812 1,734 Charles Schwab & Co. 1,738 158 Kemper Securities 1,565 172 Kidder, Peabody & Co. 1,100 55

Note: Rankings as of Jan. 1, 1992 * U.S. branch offices

Sources: Securities Industry Assn.; Primerica

A Shearson and Sandy Weill Odyssey The Shearson Lehman Bros. brokerage that Sandy Weill built has gone through a number of permutations. A brief history:

1960: Sanford I. Weill is a co-founder of Carter, Berlind, Potoma & Weill, which starts with $215,000 of capital. Firm grows by taking over other companies.

1981: Weill sells the firm, now known as Shearson Loeb Rhoades, to American Express for $930 million, creating Shearson/American Express.

1984: Shearson buys Lehman Bros. for $380 million, renames itself Shearson Lehman/American Express.

1985: Weill, now president of American Express under Chairman James D. Robinson III, quits. Company becomes Shearson Lehman Bros.

2 1987: At high-water mark of its ownership, American Express sells part of Shearson to public, nets $574 million.

1987-88: Shearson pays $1.4 billion for E. F. Hutton, whose tangible net worth is approximately zero. Briefly renamed Shearson Lehman Hutton.

1989-90: Shearson's problems produce huge losses. American Express buys back publicly held shares of Shearson for $360 million; also pumps more than $1 billion into Shearson to keep it afloat. Company once again becomes Shearson Lehman Bros.

1993: Robinson quits. His successor negotiates to sell most of the old Shearson to Weill's Primerica Corp. for $1 billion. Lehman seeks independence. The merged company will be called Smith Barney Shearson.

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