Swiss Bank Will Buy London’s Warburg in $1.38-Billion Deal

LONDON — Swiss Bank Corp. ended months of takeover speculation by announcing Wednesday that it will buy Warburg, London’s biggest investment bank, for $1.38 billion cash.

The deal puts one of Britain’s best-known financial names in the hands of Switzerland’s third-largest bank. A Warburg merger with Wall Street giant Morgan Stanley fell through late last year.

Warburg, founded by banker Siegmund Warburg after he left Germany in 1934, grew into the biggest investment bank in London, with clients accounting for half the companies in the FTSE-100 stock index.

But takeover rumors had been swirling since the company reported a big drop in profit last October, and key staff members had been defecting amid the uncertainty.

Warburg disclosed May 2 that Swiss Bank had expressed interest in buying its investment banking operations. The disclosure followed a sharp rise that day in the company’s share price on reports that U.S. investment bank Smith Barney wanted to buy Warburg.

The next day, Warburg issued a warning that said trading in the company’s investment banking operations would push earnings far below the estimates of London analysts.

Swiss Bank and Warburg called a joint news conference Wednesday afternoon at Swiss Bank’s London offices. Earlier, Swiss Bank released a statement in Switzerland saying it had agreed to the purchase for $1.38 billion cash.