Chase Acquires Morgan

Chase Manhattan Corp. is acquiring J.P. Morgan & Co. for about $36 billion in stock, creating a union between two of the oldest and most prestigious financial firms in the United States.

The boards of both companies have approved the deal, the companies said in a statement early Wednesday. The new entity will be called J.P. Morgan Chase & Co.

Each share of J.P. Morgan will be exchanged for 3.7 shares of Chase, worth about $207 a share based on Tuesday's closing stock prices.

J.P. Morgan chairman and chief executive Douglas Warner will become chairman of the new company and Chase chairman William Harrison will become its president and chief executive.

J.P. Morgan Chase will have about $660 billion in assets, rivaling Bank of America Corp., which has $679 billion in assets, as the second largest bank holding company in the United States. It will still trail Citigroup, which had $791 billion as of June 30, 2000.

The merger between banking powerhouses Chase and J.P. Morgan is seen by analysts as a good match because the two firms' array of services complement each other.

"It's a good potential fit because there are quite a lot of areas where the two are complementary," said Ron Mandle, a banking analyst at Sanford C. Bernstein & Co.

For example, J.P. Morgan has a strong foothold in the investment banking arena, especially in the lucrative area of underwriting initial public stock offerings.

Chase, meanwhile, set out a year ago to build up its investment banking business by purchasing San Francisco-based Hambrecht & Quist, a boutique firm that specialized in the IPOs of technology companies.

If the merger is successfully completed, J.P. Morgan's broader expertise would be blended with the newly named Chase H&Q's expertise with technology companies, Mandle noted.

In addition, J.P. Morgan's inroads in Europe would be beneficial to Chase, which does not have a strong presence there.

Rumors had been swirling through the markets in recent days that J.P. Morgan, one of the most prestigious banks in business history and the namesake of the legendary banker J. Pierpont Morgan, was looking for a buyer. The speculation has helped push shares of J.P. Morgan up more than 68 percent since the end of June.

The deal is the latest instance of consolidation in the financial services industry. Last month Credit Suisse Group agreed to pay $11.5 billion in cash and stock for Donaldson, Lufkin & Jenrette Inc. Earlier this summer, Swiss banking giant UBS AG agreed to pay $11 billion for the Paine Webber Group Inc.

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