DLJ in Talks With Rival Credit Suisse
U.S. investment bank Donaldson Lufkin & Jenrette is in talks to be acquired by a larger rival, Credit Suisse First Boston, signaling more consolidation in the U.S. securities industry, sources said Tuesday.
A deal valuing DLJ at $90 per share, or $12.3 billion, is expected to be announced this morning, financial news station CNBC reported, citing industry sources.
The deal for DLJ would be a combination of half cash and half stock of Credit Suisse First Boston’s parent company, Credit Suisse, according to CNBC. Credit Suisse is Switzerland’s No. 2 bank.
DLJ and Credit Suisse spokespeople were not available for comment regarding the CNBC report.
News of the talks earlier Tuesday swept Wall Street and sent shares of the investment bank surging 28%, or $18.19, to close at $84 on the New York Stock Exchange.
Reports about the acquisition talks whipped up shares of other U.S. investment banks and brokerages Tuesday, as investors bet on increasing consolidation of the U.S. securities industry. The talks are in early stages, but sources close to the companies expect a deal to materialize.
Many financial shares rose sharply after Credit Suisse’s main Swiss rival, UBS, last month agreed to buy No. 4 U.S. brokerage PaineWebber Group Inc. in a $10-billion-plus deal. That put pressure on Credit Suisse to get a stronger foothold in the United States, analysts said.
DLJ is 70%-owned by the U.S. financial services arm of French insurer AXA, which has shopped around its stake in the investment bank for some time, according to a person familiar with the situation. New York’s J.P. Morgan & Co., for one, passed on a possible DLJ acquisition, the source said.
Two industry sources said another rumor had U.S. investment bank and perennial take-over target Lehman Bros. Holding Inc. in talks to buy DLJ. But this was a much less likely scenario than a Credit Suisse-DLJ deal, they said.
DLJ, Credit Suisse, Lehman and J.P. Morgan representatives declined comment earlier in the day on reports of the talks. An AXA spokesman in Paris told Reuters that DLJ is not core to AXA’s insurance business, but said the company does not comment on recurring rumors that it may sell the investment bank.
A deal would combine Credit Suisse’s talent for underwriting hot technology stock offerings with DLJ’s burgeoning merger advisory business; its Pershing stock-processing operation and venture capital. It also would give the Swiss bank a foothold in rapidly growing U.S. Web brokerages, because DLJ still owns a majority stake in DLJdirect Inc .
DLJ, which was founded in 1959 by three Harvard Business School graduates, earned $407.4 million, or $2.87 a share, in the first half, driven by fees from advising companies on mergers and by gains in its stocks business. DLJ and Credit Suisse combined would be the No. 3 underwriter of global stock offerings and the No. 1 underwriter of junk bonds.
The company should be worth at least $90 to $95 a share, based on its book value--or assets minus liabilities--of about $31 a share, added an analyst at a large money management firm. Many deals in the financial services industry have been done at a price equal to three times or more the target’s book value per share, he added.
Reports of the DLJ talks spurred a broad rally in the investment banking sector.
Shares of Lehman Bros. rose $3.44 to close at $140.50 on the NYSE. Bear Stearns rose $3.31 to close at $63.13; J.P. Morgan rose $3.88 to close at $149; and Goldman Sachs Group Inc. jumped $5 to close at $127.44, all on the NYSE.
Shares of DLJdirect, DLJ’s online brokerage unit, climbed $3.06 to close at $11, also on the Big Board.
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DLJ Sale?
Donaldson Lufkin & Jenrette stock jumped 28% on reports that it was in talks to be acquired by Credit Suisse First Boston.
DLJ monthly closes and latest
Tuesday: $84, up $18.19
Source: Bloomberg News
