Magazine article American Banker

Credit Suisse-DLJ Deal Hits Consolidation Hot Button

Magazine article American Banker

Credit Suisse-DLJ Deal Hits Consolidation Hot Button

Article excerpt

The announcement Wednesday that Credit Suisse Group of Switzerland has plans to buy Donaldson, Lufkin & Jenrette Inc. for $11.5 billion sparked yet another round of speculation about consolidation in the securities industry.

Four names regularly pop up as potential acquirers or acquirees: Bear Stearns Cos., Chase Manhattan Corp., Lehman Brothers, and J.P. Morgan & Co. The latest deal announcement "clearly has put these four in the limelight," said Lauren Smith, an analyst at Keefe, Bruyette & Woods Inc.

Coming on the heels of last month's announcement that UBS AG of Switzerland would take over PaineWebber Group in a transaction valued at about $12 billion, the DLJ deal reinforces the notion that the securities industry is going through the same changes that have altered banking: The big are getting bigger, and hundreds of new firms are being created.

Bear Stearns' stock rose the most among the four most-talked-about companies Wednesday, jumping 3.4% to close at $65.24. Its chairman has recently been quoted as indicating a willingness to consider a sale -- at a steep price of about four times book value.

Analysts said it is unlikely that Bear Stearns could command such a price -- even DLJ's deal, for about three times book value, is considered pricey. Bear Stearns, moreover, is seen as "behind the curve" in underwriting securities and advising corporate clients, Ms. Smith said. A Bear Stearns spokesman declined to comment.

Bear Stearns is not seen as a good match for a U.S. company, analysts said, but a foreign buyer might swoop in.

As for Chase, it has been an acquirer of late. This year it has bought Beacon Capital Partners -- bringing with it a cadre of Wall Street all-star investment bankers -- and last year it acquired Hambrecht & Quist. The company is believed to be on the lookout for yet another deal that would substantially add to its investment banking and asset management capabilities. …

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