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Banking industry

J.P. Morgan and Chase Manhattan Corp. Announce Massive Merger

Strategic Insights

— 2 min read

The two banking giants, Chase Manhattan Corp. and J.P. Morgan & Co., have agreed to merge in a deal valued at approximately $36 billion in stock. The combined firm, J.P. Morgan Chase & Co., will have assets of about $660 billion and stockholders' equity of more than $36 billion. The merger brings together two of the oldest names in U.S. finance, creating a global powerhouse with a diverse range of capabilities to address the full spectrum of clients' needs.

Key Takeaways:

  • The deal values J.P. Morgan & Co. at approximately $36 billion in stock, with 3.7 shares of Chase common stock exchanged for each share of J.P. Morgan common stock.
  • The merged company will have assets of approximately $660 billion and stockholders' equity of more than $36 billion.
  • The deal is expected to result in synergies of approximately $1.9 billion (pre-tax), consisting of estimated cost savings of approximately $1.5 billion (pre-tax) and estimated incremental net revenues of approximately $400 million (pre-tax).
  • The worldwide headquarters of J.P. Morgan Chase & Co. will be in Manhattan, although no decision has been made as to the exact location.
  • The deal is expected to close in the first quarter of 2001 and is subject to approval by shareholders of both companies, as well as by U.S. Federal and state and foreign regulatory authorities.
  • Analysts noted the deal could result in the loss of as many as 10,000 jobs.
  • The merged company will have a diversified revenue stream, with expense savings resulting from combining duplicate functions.
  • Douglas A. Warner III, chairman and CEO of J.P. Morgan, will become chairman of J.P. Morgan Chase & Co., while William B. Harrison, Jr., chairman and CEO of Chase, will become president and CEO of J.P. Morgan Chase & Co.

Statistics:

  • The deal values J.P. Morgan & Co. at approximately $36 billion in stock.
  • The merged company will have assets of approximately $660 billion.
  • The deal is expected to result in synergies of approximately $1.9 billion (pre-tax).
  • The synergies are anticipated to be achieved by the end of the second year following the merger, with one-third estimated to be realized in the first year.
  • The deal is expected to cost approximately $2.8 billion (pre-tax).
  • J.P. Morgan & Co. was trading at $185 a share after hours Tuesday, more than $15 above the previous close.

Sources:

  • UPI, "Chase Manhattan, J.P. Morgan Agree to $36 Billion Merger" (Sept. 13, 2000)
  • COMTEX, "Chase Manhattan, J.P. Morgan Agree to $36 Billion Merger" (Sept. 13, 2000)
  • United Press International, "Chase, J.P. Morgan to Merge in $36 Billion Deal" (Sept. 13, 2000)

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