NEW YORK, NOV. 25 -- E.F. Hutton Group Inc.'s chief executive acknowledged today that the Oct. 19 stock market collapse and its aftermath compelled the troubled brokerage to seek a merger partner or cash infusion.
The statement by Robert Rittereiser, president and chief executive, was the first explanation from management of why Hutton was abandoning independence since the firm disclosed Monday that it was up for sale.
Rittereiser made the statement in a memorandum to all employes and released it to the press.
"The board's decision to pursue an additional capital infusion or a strategic combination comes at a time when we have performed well overall, and continue to grow in certain markets," he said.
"However, the events of the last few weeks have altered the conditions under which we compete, including creating new long-term capital demands," he said.
"Prudence requires that we pursue this course to assure our stockholders, employes and clients continued success. We expect this process to be conducted and concluded rapidly."
Shearson Lehman Bros. Inc., which approached Hutton a year ago about a possible merger, said Monday that it had been contacted by Hutton for new talks. Hutton has not identified any parties it is talking to.
Hutton was the nation's 10th largest securities firm at the beginning of this year with about $1 billion in capital.
It is the first major brokerage to seek a buyer as a result of the stock market collapse last month.
The crisis came at a time when the securities industry boom was shrinking anyway, compounding fears about unemployment and retrenchment on Wall Street.
A Shearson-Hutton merger would create duplicate positions and likely lead to layoffs of Hutton employes.
In an attempt to relieve employe anxiety, Rittereiser said: "I want to assure you that all of senior management is mindful of the concerns employes have at times like these.
"We will act in good faith to preserve and enhance our human assets -- our most important assets -- in whatever course we take."
Hutton's decision to seek a partner came after a revamped management spent more than a year attempting to revitalize the troubled brokerage, which has suffered a number of setbacks.
The most devastating was Hutton's 1985 guilty plea to 2,000 federal counts of mail and wire fraud stemming from a check-overdraft scheme, which caused a major loss of confidence in the firm.