Because of incorrect information supplied by the Associated Press, a photo caption in yesterday's Business section transposed the identifications of Chase Manhattan Corp. Vice Chairman James B. Lee and Hambrecht & Quist Group Chairman Dan Case. (Published 09/30/99)
Financial services powerhouse Chase Manhattan Corp. said yesterday that it will acquire investment house Hambrecht & Quist Group for $1.35 billion, giving Chase's investment-banking business a foothold in the growing sectors of information technology and health care.
The acquisition "extends Chase's one-stop investment-banking range of products in the highest-growth sector of the U.S. economy," said William B. Harrison Jr., president and chief executive of Chase Manhattan Corp.
San Francisco-based Hambrecht & Quist is a key provider of investment-banking services for "new economy" industries, including technology, life sciences and information services. Its clients include Amazon.com Inc., Inktomi Corp. and Siebel Systems Inc., which will give Chase a ready customer base not just for investment banking but for its other services as well. Besides helping its clients raise money, Hambrecht & Quist advises on mergers and acquisitions.
"Chase is buying a lot of opportunity for $1.3 billion," said Catherine L. Murray, senior banking industry analyst at J.P. Morgan Securities Inc.
The deal will not significantly add to Chase's revenue, since Hambrecht & Quist had less than $400 million in net revenue last year--less than a tenth of the revenue posted by Chase Securities. Hambrecht will be an arm of Chase Securities when the merger is completed, probably by the end of the year. For its fiscal year ending September, Hambrecht & Quist is expected to report revenue of $593 million.
The $1.35 billion price tag represents a 22 percent premium over the value of Hambrecht & Quist based on Monday's closing stock price; Hambrecht's shares closed at yesterday at $48.68 3/4, up $7.62 1/2. Even before yesterday, Hambrecht stock has appreciated more than 120 percent in the past year. Chase closed slightly lower, at $73.81 1/4.
"It's a people's business, and Chase is acquiring the [Hambrecht & Quist] team," said Stephen Biggar, bank analyst at S&P Equity Group. "The premium is not out of line with some recent deals in the industry."
Chase--which has more than $357 billion in assets--has been actively scouting for strategic buys for more than a year and recently was in talks with Morgan Stanley Dean Witter, which has since rejected a merger proposal.
Other securities companies reported to be on Chase's radar include Merrill Lynch & Co. and Goldman Sachs Group Inc. "In general, financial services continue to converge, with companies trying to plug their gaps," said Murray of J.P. Morgan.
According to Chase, more than half of the mergers and acquisitions in the first half of 1999 took place in the "new economy" sectors, which also accounted for half of the first quarter's equity offerings.
Hambrecht will assume the Chase name and continue to be headquartered in San Francisco.