Brokerages Soar on Speculation About Mergers

Goldman Sachs Group Inc., Charles Schwab Corp. and other brokerages surged Friday on takeover speculation following Deutsche Bank and Dresdner’s decision Thursday to combine.

The gains were fueled by speculation that Chase Manhattan Corp. is looking to buy Goldman or another securities firm. Goldman and Chase declined comment.

Goldman climbed $5.06, or 5%, to $112.13; Schwab surged $6.75, or 14%, to $52; Morgan Stanley Dean Witter & Co. rose $3.25, or 4%, to $86.63; Merrill Lynch & Co. rose $1.81, or 2%, to $104.94; and Lehman Bros. Holdings rose $2.63, or 3%, to $82.13. Chase fell $2.44, or 3%, to $78.69. All trade on the New York Stock Exchange.

“It’s just sheer speculation following the Dresdner-Deutsche merger as people ask ‘Who’s next,’ ” said Lauren Smith, an analyst at Putnam, Lovell, de Guardiola & Thornton. “These firms have always been attractive, and the moment you hear the rumor of some consolidation, they all rise.”

Germany’s Deutsche Bank said it will acquire smaller rival Dresdner Bank for about $29 billion in stock.

Investors have wagered several times in the last few years that Chase Manhattan, the second-biggest U.S. bank, would buy a global U.S. investment bank as a way to leapfrog to the top in securities businesses that provide fatter margins than bank lending.

Many analysts don’t think the U.S. brokers are likely to sell out any time soon.

“These are ridiculous rumors,” said Steve Eisman, a CIBC World Markets analyst. “Chase would want Goldman. But why would Goldman--or for that matter Morgan Stanley or Merrill--want Chase? It doesn’t do much for the brokerages.”

Smith agreed.

“Those firms that are financially very strong--Goldman, Merrill Lynch, Morgan Stanley, Donaldson, Lufkin & Jenrette and Schwab--are likely to go it alone,” she said.