Investors Hear a Takeover Wave
Don't bet on a rush of takeovers on Wall Street -- just yet.
Investors Thursday reacted to a merger agreement between J.P. Morgan Chase & Co. and Bank One Corp. by bidding up shares of brokerage firms. The view: The firms, already losing market share to the banking behemoths, will feel pressure to sell out in the months ahead as their chief rivals continue to bulk up.
Shares of A.G. Edwards Inc. jumped 4% and Lehman Brothers Holdings Inc. rose 3%, while takeover speculation helped send the Dow Jones U.S. Investment Services Index 1.6% higher, even as the overall market rose just slightly.
Yet securities firms are doing so well lately that most are unlikely to feel compelled to find a merger partner right away, some analysts say. Thursday, for example, Merrill Lynch & Co. told employees that the firm expects to report record net earnings for 2003 when it reports results Wednesday.
"We're not at the tipping point, yet," says Glenn Schorr, a securities-industry analyst at UBS. Brokerage firms and investment banks "are managing their expenses and risk much better," and their shares have soared, "so there's not enough pressure on them." While banking rivals continue to encroach on their turf by offering loans to clients as a way to sell clients more services, Wall Street firms have largely maintained their hold on the most profitable segments of their business. Advisory work on mergers and acquisitions, for example, still is dominated by firms like Goldman Sachs Group Inc.
At the same time, the brokerage firms have come up with creative ways to compete against banks in the lending arena. That has eased pressure on the firms to find a partner, at least for now.
"Banks have done a great job taking market share in debt, but not necessarily in M&A" or stocks, says Mr. Schorr. He notes that brokerage firms have been increasing their return on equity in recent years, a key barometer of their health.
In addition, the current big bank deal, along with the previous blockbuster, when Bank of America Corp. agreed to purchase FleetBoston Financial Corp., are aimed at expanding retail operations rather than investment banking.
To be sure, securities firms have been sweating it out since the late 1990s when Citigroup Inc. set the new model for combining banking with securities, and large banks began making steady inroads into Wall Street's bread-and-butter businesses.
Securities firms have tried to match the banks in the loan giveaway. But their coffers are smaller so sometimes they have lost out. The three largest securities firms -- Morgan Stanley, Merrill Lynch and Goldman Sachs -- did 25% of all the stock and underwriting business last year, down from almost 34% in 2000, as large foreign and domestic banks pushed in. In 2001, Citigroup dethroned longtime underwriting king Merrill, partly because Merrill ended its policy of doing less profitable short-term bond deals to keep the crown.
While the Wall Street firms may be losing some market share, their bottom lines are solid. Pretax profits for securities firms are likely to have hit $15 billion last year, more than double the level of 2002, according to the Securities Industry Association. While that is well off the record $21 billion of 2000, it is a reflection of the sharp turnaround in fortunes for the firms. Merrill Lynch shares, for example, are up 40% in the past year.
Profits are booming because firms have slashed costs, enabling them to boost earnings as the market turned around last year. And they've been using their own money to make savvy bets on markets, often a high-profit margin business. Securities firms have also been working on ways to take on the banks. Last year, Goldman did a deal with Japanese bank Sumitomo Mitsui Financial Group Inc. that lets Goldman lend more money to corporate clients without taking on too much risk.
While securities firms may feel pressure to find a partner over the long haul, the two big bank deals don't make either Bank of America or J.P. Morgan much more formidable competitors in securities sales or trading. "It's hard to view this one action as being a threat to traditional Wall Street firms because [the Bank One deal] is really more of a retail banking play for J.P. Morgan," says Richard Strauss, analyst at Deutsche Bank AG.
Still, the Bank One deal would boost J.P. Morgan to the No. 3 slot from No. 5 in overall securities underwriting. In the big bank merger that sparked interest in possible future deals involving brokerage firms, J.P. Morgan Securities Inc. and Simpson Thacher & Bartlett LLP advised J.P. Morgan, and Lazard Freres & Co. and Wachtell, Lipton, Rosen & Katz advised Bank One.
Either way, investors are anticipating that deals could happen over the long term, part of the reason shares moved up Thursday. Merrill Lynch, Morgan Stanley and Goldman Sachs each rose about 2%. Among the more likely targets, St. Louis-based A.G. Edwards has managed to fend off suitors in the last few years. But as a firm focused on individual investors, it would be easier to integrate than a full-service brokerage firm. Thursday, the firm declined to comment on the reasons behind the movement in its stock or whether it would be open to a takeover offer.
Lauren Smith, who follows securities firms at Keefe, Bruyette & Woods Inc., said the firms' stocks were reacting to the notion that, sooner or later, J.P. Morgan may want to emulate the Citigroup model, which would require the purchase of a big retail-brokerage force. "The stocks were reacting to that element today: What does Citigroup have that they don't?" she said.
Executives of Bear Stearns Cos. have in the past said they would be amenable to a sale, at the right price. Two or so years ago it too held informal discussions with Bank One regarding a possible merger, according to a person familiar with the matter. Bear, however, proved too pricey for Bank One and the talks didn't go anywhere.
Merrill Lynch looked at a number of acquisition targets a few years ago, before E. Stanley O'Neal took over the firm last year. David Komansky, Mr. O'Neal's predecessor, flirted with selling or merging the firm to a host of institutions, including J.P. Morgan and Chase Manhattan, which merged as J.P. Morgan Chase.
But now, Merrill is doing well and some doubt a deal is in the offing. The internal memo that the firm sent to employees Wednesday indicated that fourth-quarter net profit would hit or exceed $1.04 billion. Based on the number of shares Merrill reported for the third quarter, that would imply Merrill may have earned as much as $1.04 a share, or four cents higher than the current consensus forecast by analysts, in the fourth quarter.
Lehman is another firm often cited as a takeover candidate. One person close to the firm said Thursday that it's unlikely to unveil a large purchase of its own soon. In July it paid $2.63 billion in stock and cash for Neuberger Berman, and is still integrating that acquisition.
华尔街听到并购风潮
不要指望华尔街会掀起并购风--至少现在还不能作出如此预测。
周四，投资者对摩根大通(J.P. Morgan Chase & Co.)与美一银行(Bank One Corp.)的合并协议作出反应，推高经纪类股。他们认为，随著主要竞争对手规模的进一步扩大，已经丧失市场占有率的证券公司将在今后几个月内面临出售股份的压力。
A.G. Edwards Inc.股价上涨4%，雷曼兄弟(Lehman Brothers Holdings Inc.)上涨3%。并购传言推动道琼斯美国投资服务分类指数走高1.6%，而大盘涨幅十分微弱。
但是，一些分析师称，证券公司近来一直表现不错，大多数可能并不急于寻找一个合并伙伴。例如，美林(Merrill Lynch & Co.)周四告知雇员称，公司预计在下周三公布业绩时宣布2003年净利润创历史新高。
瑞士银行(UBS)证券行业分析师索尔(Glenn Schorr)称，经纪公司和投资银行的费用管理及风险控制水平大大提高，它们的股价大幅飙升，因此目前尚未面临足够的并购压力。
虽然银行业竞争对手继续通过向客户提供贷款以出售更多服务的方式来侵占地盘，但证券公司基本上坚守住了最盈利业务的市场地位。例如，对并购活动的咨询工作仍由高盛集团(Goldman Sachs Group Inc.)等公司所控制。
与此同时，经纪公司也想出了新的办法和银行在贷款领域展开竞争。这减轻了公司寻求并购伙伴的压力，至少目前来看就是如此。 索尔称，银行在债务管理方面拥有很高的市场占有率，但未必在并购和股票交易方面占有优势。他说，近年来经纪公司一直在提高它们的资本回报率，这是衡量它们健康与否的一个关键指标。
另外，此项最新并购以及此前美国银行(Bank of America Corp.)与FleetBoston Financial Corp.的合并都是为了扩大零售业务，而非投资银行业务。
无庸置疑，证券公司自从20世纪90年代末以来一直在逆境中求生，当时，花旗集团(Citigroup Inc.)开辟了银行业务与证券业务合并的新模式，一些大银行开始稳步侵入华尔街公司赖以为计的投行业务。 虽然华尔街公司可能会丧失部分市场占有率，但其利润状况仍然十分强劲。据证券行业协会(Securities Industry Association)统计，去年证券公司的税前利润可能达到150亿美元，较2002年增长一倍以上。虽然这一数字远远低于2000年创记录的210亿美元，但它反映出该行业的命运出现重大转机。例如，美林的股价在过去一年中上涨了40%。
大幅削减成本的举措使这些公司得以藉去年市场复苏之机提升利润。它们还利用自有资金投资证券市场，经常会获得较高的利润。此外，它们一直在想方设法开展银行业务，去年高盛和日本银行三井住友金融集团(Sumitomo Mitsui Financial Group)达成协议，使其能够向企业客户提供更多贷款，而无需承担过高风险。
虽然长远来看，证券公司可能会遭遇到寻求并购的压力，但上述两宗并购交易并不会使美国银行或摩根大通变成证券销售或交易方面更可怕的竞争对手。德意志银行(Deutsche Bank AG)的分析师史特劳斯(Richard Strauss)称，很难把单纯的并购视为对传统华尔街公司的威胁，收购美一银行实际上是摩根大通扩充零售银行业务而已。
不过，此次收购将使摩根大通在证券承销业务的排名由第五位提升至第三位。人们猜测，该交易将引发今后更多经纪公司的并购活动。在此项交易中，J.P. Morgan Securities Inc.和Simpson Thacher & Bartlett LLP担任摩根大通的顾问，而Lazard Freres & Co和Wachtell, Lipton, Rosen & Katz担任美一银行的顾问。
不管怎样，投资者仍预计长期来看此类并购交易还会发生，这也是周四证券公司股价上扬的部分原因，其中美林、摩根士丹利(Morgan Stanley)和高盛均上涨2%左右。位于圣路易斯的A.G. Edwards是潜在的收购目标之一，它在过去几年中已经回绝了数家求购者，但是作为以个人投资者为服务对象的公司，它要比一个全面的经纪公司更容易整合。A.G. Edwards周四拒绝对其股价波动的原因发表评论，也未说明是否愿意接受收购要约。
Keefe, Bruyette & Woods Inc的分析师史密斯(Lauren Smith)称，证券公司股价周四走强的原因是，人们认为，摩根大通可能迟早要效仿花旗的模式，收购一家零售银行和经纪业务并存的大公司。
贝尔斯登(Bear Stearns Cos.)的管理人士过去曾表示，他们愿意以适当价格出售股份。据知情人士透露，约两年前，公司和美一银行就并购问题进行了非正式会谈，但是因要价过高而无果而终。
美林曾在数年前寻找过许多收购目标，当时的首席执行长科曼斯基(David Komansky)与许多机构商谈过并购事宜，其中包括摩根大通。
但是现在，美林的经营状况良好，一些人怀疑它是否还会进行并购。公司周三向其员工发布的内部备忘显示，公司第四季度净利润将达到或超过10.4亿美元。按照美林报告的第三季度股本数字，这意味著其每股收益可能达到1.04 美元，较分析师的普遍预期高出4美分。
雷曼兄弟也是被经常作为潜在收购方提及的公司。知情人士称，该公司不可能很快公布大规模的收购交易。去年7月份，它以26.3亿美元的股票和现金收购了Neuberger Berman，目前仍在对其进行整合。
