Chase Manhattan to Acquire J.P. Morgan in $34 Billion Stock Deal

Strategic Insights -

The proposed merger between midmarket Chase Manhattan Corp. and upper-crust J.P. Morgan & Co. Inc. will create a banking behemoth with $660 billion in assets, making it the third-largest player in the world. The deal, valued at $34 billion, combines Chase's consumer banking, mortgage, and insurance businesses with J.P. Morgan's corporate side of investment banking and trading. J.P. Morgan's presence in Europe and Asia will give the new entity a significant edge in global markets, with half of its combined revenue expected to come from outside North America.

Key Takeaways:

  • The merger will create a new entity with $660 billion in assets, making it the third-largest player globally behind Citigroup Inc. and Bank of America Corp.
  • The consumer banking, mortgage, and insurance businesses will be called Chase Manhattan, while the corporate side of investment banking and trading will be called J.P. Morgan.
  • J.P. Morgan's European and Asian presence will enable the new entity to tap into global markets, with half of its revenue expected to come from outside North America.
  • Chase has been aggressive in building its investment banking business, with recent acquisitions including Hambrecht & Quist, Robert Fleming, and Beacon Group of Boston.
  • J.P. Morgan has struggled to shift from a traditional lending bank to an investment bank, but its private banking business, with $400 billion in assets under management, will be a key contributor to the new entity.
  • The combined entity will have $720 billion in assets under management, ranking it third worldwide.
  • The merger is expected to result in cost savings of $1.5 billion through combining certain systems, real estate, and personnel.
  • The deal is the latest in a series of acquisitions in the banking industry, following UBS's purchase of PaineWebber Group Inc. and Credit Suisse Group's acquisition of Donaldson Lufkin & Jenrette.

Statistics:

  • $34 billion: The value of the proposed merger between Chase Manhattan and J.P. Morgan.
  • 3.7: The number of shares of Chase Manhattan stock to be issued for each J.P. Morgan share.
  • $660 billion: The combined assets of Chase Manhattan and J.P. Morgan, making it the third-largest player globally.
  • $400 billion: The assets under management in J.P. Morgan's private banking business.
  • $720 billion: The combined assets under management of the new entity.
  • $1.5 billion: The expected cost savings through combining certain systems, real estate, and personnel.
  • $181 1/4: The closing price of J.P. Morgan's stock before the announcement.
  • 50 11/16: The closing price of Chase Manhattan's stock before the announcement.

Sources:

  • "Chase Manhattan to Acquire J.P. Morgan in $34 Billion Stock Deal" by Marilyn Alva and Steve Watkins, Investor's Business Daily.
  • Douglas Warner, Chairman of J.P. Morgan, as quoted in the article.
  • Steven Eisman, Analyst at CIBC World Markets, as quoted in the article.
  • Ron Mandle, Analyst with Sanford C. Bernstein & Co., as quoted in the article.
  • Alyssa Greenspan Sibley, Analyst at Morningstar Inc., as quoted in the article.
  • David Hendler, Analyst with Credit Suisse First Boston, as quoted in the article.
  • William Harrison, Chief Executive of Chase Manhattan, as quoted in the article.