Chase Agrees to Buy J.P. Morgan & Co. in a Historic Linkup
Wall Street Journal (09/13/00) Vol. 110, No. 10 p.A1; Lipin, Steven; Sapsford, Jathon; Beckett, Paul; et al.

The latest move in the trend toward mergers in the American financial services industry is Chase Manhattan's takeover of J. P. Morgan. Recent consolidations have made the United States the world leader in finance. Morgan's lack of success in becoming a full-service investment bank that could rival the biggest players on Wall Street precipitated the bank's decision to turn to consolidation. Firms, such as Lehman Brothers Holdings, Bear Stearns, and Merrill Lynch, will likely seek to strengthen themselves to combat the new company of J.P. Morgan Chase. Meanwhile, Chase will benefit from gaining Morgan's large assets and mutual fund portfolio. The likely lower earnings Chase will experience as a result of the deal means that the company will pay a substantial price to take over Morgan. Morgan's power was eroded when it did not take advantage of initial public offerings for technology companies because of its lingering reliance on money lenders. The bank had previously sought to combine with Merrill Lynch, but Merrill Lynch felt that the overlap of many services would limit its ability to increase its value through the deal. A key reason why Chase agreed to the merger is its desire to become an international player by tapping Morgan's overseas holdings. Although Chase is already a leader in sectors such as foreign exchange, syndicated lending, and derivatives, ING Barings senior bank analyst Andy Collins notes that the deal will make Chase the clear global leader in those areas. In addition, James Schmidt, a fund manager at John Hancock Funds, notes that the merger will aid Chase in accomplishing its desire to have bulge-bracket status in the investment banking market. The Winston & Strawn law firm's head of financial institutions practice, Robert Bostrom, states that early management decisions will be a major factor in how successful the merger between Chase and Morgan becomes.


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