Chase Manhattan Corp, the number two bank in the US, has agreed to acquire investment bank Hambrecht & Quist Group for $1.35bn in cash. The acquisition of San Francisco-based H&Q gives Chase an extended presence in the securities market and a solid foundation in the lucrative business of underwriting the initial public offerings of technology companies. Terms of the deal call for Chase to pay $50 a share for H&Q, representing a 22% premium over Monday’s closing price of $41.0625.
Chase has made no secret about its desire to expand its horizons in the investment banking world and last year was reported to have held talks with both Merrill Lynch & Co and Morgan Stanley Dean Witter & Co about a possible merger. While H&Q is a smaller player than those banks – it currently ranks 10th among stock underwriters – it has earned a dominant place in the technology banking arena. Apple Computer Inc and Amazon.com Inc are among the companies it has taken public.
Chase will likely use the H&Q acquisition as a starting point from which to grow its overall investment banking business and analysts expect the bank to either make another play for a larger brokerage or to acquire more specialized firms like H&Q. We are not viewing this today as the equity platform across which we are building for all our segments, a Chase spokesperson told Bloomberg Business News.
The deal, which has already been approved by the boards of both companies, is expected to close by the end of this year. As a part of the purchase contract, Chase said it will establish a pool of $200m in stock, payable over four years, to retain key H&Q employees.
After the acquisition closes, H&Q will assume the Chase name and continue to be based in San Francisco as part of Chase Securities’ investment banking arm, headed by James Lee. Meanwhile, Daniel Case, H&Q chief executive – and brother of America Online Inc CEO Steve Case – will take on the role of chairman and CEO of Chase Securities West and head of Chase’s global technology group. Following the announcement, Hambrecht & Quist shares closed at $48.875 Tuesday, up $7.8125, while Chase shares slipped $0.3125 to close at $73.8125.
