Chase Manhattan Purchase of J.P. Morgan Appears Imminent
Banking giant Chase Manhattan Corp. was in talks Tuesday to acquire rival J.P. Morgan & Co., in a deal that could be worth more than $30 billion, sources said.
The merger, which could be announced as early as today, would unite two of the oldest U.S. banks, changing the landscape of the banking and investment-banking businesses in the United States and abroad.
The boards of both companies met Tuesday to discuss the purchase, sources said. Morgan, the fifth-largest U.S. bank, has a market value of about $29 billion.
Neither firm would comment, but employees leaving Morgan’s headquarters in New York Tuesday said they had been advised to expect a deal announcement by this morning.
Chase, the No. 2 U.S. bank, and Morgan have struggled to break into the upper ranks of investment banking as they transform themselves from traditional lenders.
In recent years, Chase Chief Executive William B. Harrison Jr. has built the 200-year-old bank through acquisitions.
The bank of J. Pierpont Morgan, meanwhile, spent the last decade building its securities business internally.
By merging and gaining greater critical mass, “they get to play the next round” on Wall Street, said Dan Goldfarb, who oversees about 2 million Chase shares at David L. Babson & Co.
Morgan, frequently mentioned this year as a likely buyout target for a number of U.S. and foreign banks, saw its shares (ticker symbol: JPM) rocket $16.19, or 9.6%, to a record $185.50 in after-hours trading Tuesday.
Some analysts said the deal could be worth as much as $220 a share.
Chase’s shares (CMB) fell $4.69 to $52.81 in after-hours activity.
The latest merger rumors, first reported in the New York Times, were heightened when Morgan CEO Douglas Warner III canceled a speech to investors Tuesday.
By combining with Morgan, Chase would leap to fifth place from eighth as a global corporate mergers advisor, according to Bloomberg data.
The two firms also are the world’s largest “derivative” securities dealers.
“You get a good investment bank, not excellent, but solid,” Goldfarb said. “You get an excellent asset management business; then you get an international business that is pretty extraordinary.”
Chase, which owns investment banker Hambrecht & Quist, is a big deal advisor in the tech sector, where Morgan is weak.
The banks are legacies of two giants of the Industrial Age: John D. Rockefeller and J. Pierpont Morgan.
For Morgan, selling would end 150 years of independence after the lending bank adapted slowly to a world of online brokers and initial public offerings.
“J.P. Morgan, with its wholesale tradition, found it very difficult to compete,” said Ron Chernow, author of “The House of Morgan,” a history of the bank. “It didn’t have until very recently the relationships with the ‘new-economy’ start-ups, and it certainly didn’t have the relationships with retail investors.”
A takeover of Morgan would underscore the quickening pace of financial industry consolidation. It could be the largest purchase of a financial company in more than two years if it tops the $31.1 billion that Citigroup agreed to pay for Associates First Capital Corp. last week.
The talks between Chase and Morgan come after each failed to link with other companies, with Chase rebuffed by Merrill Lynch & Co., and Morgan ending talks with Donaldson, Lufkin & Jenrette, which recently agreed to be bought by Credit Suisse.
Chase “probably wanted Merrill Lynch but they’ll take J.P. Morgan,” said James Schmidt, a portfolio manager for John Hancock Advisors in Boston, with $11 billion in financial services stocks.
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Bloomberg News and Reuters were used in compiling this report.
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Betting on a Bid
Shares of banking giant J.P. Morgan (ticker symbol: JPM) had mostly traded in a fairly narrow range since mid-1998, despite recurrent takeover rumors. But the latest batch of rumors has sent the stock soaring.
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J.P. Morgan shares, monthly closes and latest on the New York Stock Exchange:
Tuesday: $185.50, up $16.19
Source: Bloomberg News
