(September 13) – “Chase Manhattan Corp., a banking giant formed from mergers of three New York banks, has agreed to acquire venerable J.P. Morgan & Co. for about $36 billion in stock, a deal that would bring together two of the oldest names in U.S. finance,” writes Steven Lipin in today’s Wall Street Journal.

“The deal, which both companies confirmed Wednesday, marks the latest in a series of huge transactions in the rapidly consolidating financial-services industry. It is expected to end the independence of one of the most prestigious banks in business history, one that fell behind the financial-services giants formed in recent years such as Citigroup Inc. and Morgan Stanley Dean Witter & Co. The negotiations underscore a failed attempt by J.P. Morgan to build itself into a full-service investment bank and crack the big leagues on Wall Street.”

“The deal highlights how many of today’s global financial giants are U.S. companies that have leapfrogged over their European counterparts. In effect, the globalization of finance has become the Americanization of finance. Many U.K. financial institutions are marginal players or have been swallowed up; only a handful of European banks such as Deutsche Bank AG remain serious contenders to be a global survivor.”

“On Wall Street, the deal is expected to further pressure a wide group of players to gain heft, from smaller firms such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. to giants such as Merrill Lynch & Co. The agreement follows closely on the heels of announced deals to combine Credit Suisse First Boston with Donaldson, Lufkin & Jenrette Co., and UBS AG with PaineWebber Group Inc.”

“The boards of both Chase and J.P. Morgan approved the deal Tuesday. Each share of J.P. Morgan was set to be exchanged for 3.7 shares of Chase.”

“At current prices, the agreement values shares of J.P. Morgan at roughly $196. In 4 p.m. trading on the New York Stock Exchange Tuesday, J.P. Morgan stock was at $183.88, up $14.88, but in after-hours trading it moved as high as $185.50. Chase was off $3.75 at $53.75 a share in 4 p.m. Big Board trading. In the after-hours it was trading at $52.81.”

“The deal would create a financial titan with a combined $675 billion in assets. In size it would rank behind only Citigroup, with $800 billion, and Bank of America, with $680 billion. The institution would link Chase’s powerful syndicated-lending franchise and its venture-capital arm with Morgan’s profitable $400 billion in assets under management at its private-banking arm. The deal also would give Chase a stake in a major mutual-fund company. J.P. Morgan owns just under half of American Century Investments, which has about 75 no-load mutual funds and nearly $100 billion in fund assets.”

“The name of the new behemoth would be J.P. Morgan Chase. Morgan’s Mr. Warner would be chairman of the combined company. Chase Chairman William Harrison would be chief executive. The two would be co-heads of the executive committee.”