Chase Manhattan gets added clout in Asia with J.P. Morgan purchase
Chase Manhattan gets added clout in Asia with J.P. Morgan purchase
SINGAPORE (Reuters): Chase Manhattan Corp. will boost its Asian investment banking business with its US$35 billion acquisition of blue-blooded global player J.P. Morgan, but the deal won't catapult it to number one in some big markets.
The companies employ nearly 9,000 in Asia with Chase accounting for almost 80 percent of that figure. Key offices in the region are Japan, Hong Kong, Australia and Singapore, with representative branches dotted throughout the region in even remote places like Malaysia's Labuan island.
Chase has been active this year in Asia, buying Robert Flemings Holdings, a stake in Australasian investment bank Ord Minnett and dumping its retail banking operations in Hong Kong in a shift to managing money.
The Flemings $7.73 billion buy in April was its biggest step, as it expanded beyond its traditional banking and debt finance business. British-based Flemings has major securities broking, research, fund management and equity investment banking operations in Hong Kong and around the region.
In Asia's top financial market Japan, globally larger Chase is outgunned by J.P. Morgan, which employs 850 people, nearly twice as many as Chase.
J.P. Morgan is strong in Japanese government bonds and asset management, while Chase's focus is on corporate banking.
Chase is said to be stronger on foreign exchange, where there could be overlaps, but despite talk of large layoffs in merged underwriting and currency trading operations in New York and London, J.P. Morgan staffers in Tokyo were anything but glum.
"I don't think anyone's thinking it's a big negative at the moment," one Morgan staffer said. "Everyone is quietly excited."
J.P. Morgan and Chase officials in Asia declined to comment on any possible layoffs.
In July, Chase offered to buy 54 percent of Australasian investment bank Ord Minnett owned by Ord Minnett staff. The deal was related to the Flemings purchase done just a few months prior, since Flemings owned 46 percent of Ord Minnett.
The purchase boosted its profile in retail and institutional stockbroking in Australia.
J.P. Morgan Australia Pty. has an established role in project finance and securitization while Chase is a player in fixed income capital markets, ranks as number three in high-grade corporate debt for international and Australian issues, and is also number three in syndicated loans.
Analysts said the gains in a Chase-J.P. Morgan merger were primarily in trans-Pacific strength, boosting its capability in U.S. bond raisings.
"The market leader (in Australia) is clearly UBS Warburg which is involved in mergers and acquisitions, investment banking and stockbroking," one analyst said.
"Chase's acquisition of JP Morgan isn't going to give them a weapon that someone else doesn't already have."
Together, Chase and J.P. Morgan will have total assets under management of $720 billion, making it the third biggest U.S. funds manager. Based on proforma full-year 1999, J.P. Morgan Chase & Co. will have revenues of $31 billion and earnings of $7.5 billion. About half its earnings will come from investment banking.
But competition will still be stiff.
The top three bookrunners of Asia equity deals in the first quarter of 2000 were Goldman Sachs, BNP Peregrine and China International Capital Corp., according to Thomson Financial.
In 1999, for Asia excluding Japan mergers and acquisition advisory, Goldman Sachs, Morgan Stanley Dean Witter and Merrill Lynch & Co. Inc. took top honors, capturing 54.6 percent of the total deals valued at $34.9 billion. J.P. Morgan was number five and Flemings number eight, Thomson said.