Chase, J.P. Morgan to merge

A merger between Chase Manhattan Corp. and J.P. Morgan & Co. Inc. will result in a firm to be named J.P. Morgan Chase & Co. The merged company will have assets of approximately $660 billion and stockholder's equity of more than $36 billion. On a pro-forma basis, J.P. Morgan Chase & Co. in 1999 would have had net income of approximately $7.5 billion and revenues of approximately $31 billion.

The merger agreement, which has been approved by the boards of directors of both companies, provides that 3.7 shares of Chase common stock will be exchanged for each share of J.P. Morgan common stock. Each series of J.P. Morgan preferred stock will be exchanged for a similar series of preferred stock of Chase, the surviving corporation of the merger. Based on Chase's closing price on Sept. 12, the transaction would have a value of some $207 for each share of J.P. Morgan common stock.

Officials said the wholesale business will be known globally as J.P. Morgan and will encompass investment banking (including strategic advisory, equity and debt capital raising, credit, and global trading and market-making activities), operating services, wealth management, institutional asset management and private equity. The retail business will be known as Chase, consisting of credit cards, regional consumer banking in the New York tri-state area and Texas, mortgage banking, diversified consumer lending, insurance and middle-market banking. Douglas A. Warner III, chairman and chief executive officer of J.P. Morgan, will become chairman of J.P. Morgan Chase & Co. and cochair of the firm's executive committee, its senior policy making management group, comprised of senior executives form both Chase and J.P. Morgan. William B. Harrison, Jr., chairman and chief executive officer of Chase, will become president and chief executive officer of J.P. Morgan Chase & Co. and cochair of the executive committee. In addition to Warner and Harrison, the board of directors for the merged firm will consist of eight members from the current Chase board and five members from the current J.P. Morgan board.

"This merger is a breakthrough for J.P. Morgan and Chase that will position the new firm as a global powerhouse," said Warner. "With a formidable client franchise and a potent array of capabilities to address the full spectrum of clients' needs, we see exceptional prospects for sustained growth and profitability. A diversified revenue stream enhances those prospects. And our clients will find a common commitment to high standards of integrity, excellence and service."

The members of executive committee reporting to Harrison will be Geoffrey T. Boisi, David A. Coulter, Ramon de Oliveira, Walter A.

Gubert, Thomas B. Ketchum, Donald H. Layton, James B. lee, Jr., Marc J. Shapiro and Jeffrey C. Walker. Boisi and Layton will be co-chief executive officers of the investment bank and coordinate all of the wholesale banking activities. Coulter will continue to head the retail business of the firm and lead its Internet initiatives. De Oliveira will head the institutional asset management and wealth management businesses. Gubert will be chairman of the J.P. Morgan investment bank. Lee will head the investment bank's new business and commitments committees. Walker will continue as head of the new firm's private equity group. Shapiro will continue in his present capacity as head of finance, risk management and administration. Ketchum, along with Shapiro, will co-chair the merger transition team. In addition, Denis J. O'Leary and Nicolas S. Rohatyn will co-head the combination of Chase.com and LabMorgan, reporting to Coulter.

Chase and J.P. Morgan also announced additional senior management positions: Dina Dublon, chief financial officer; John J. Farrell, human resources; Frederick W. Hill, marketing and communications; and William H. McDavid, general counsel.

Neat Garonzik, vice chairman of Chase, has decided to leave the firm. The merger is expected to result in synergies of approximately $1.9 billion (pre-tax), consisting of estimated cost savings of approximately $1.5 billion (pie-tax) and estimated incremental net revenues of approximately $400 million (pre-tax). The synergies, according to the announcement, are anticipated to be

achieved by the end of the second year following the merger, with onethird estimated to be realized in the first year. It is anticipated that the merger will result in costs of

approximately $2.8 billion (pre-tax), a portion of which will be taken as a charge upon closing.

The worldwide headquarters of J.P. Morgan Chase & Co. will be in Manhattan, although no decision has been made as to the exact location. The transaction is expected to close in the first quarter of 2001, subject to regulatory and shareholder approvals.