Update: Credit Suisse First Boston to Buy DLJ

Updated from 8:53 a.m. EDT

Credit Suisse First Boston has agreed to acquire Donaldson Lufkin & Jenrette (DLJ), as expected, in an $11.5 billion deal that would create the second-largest lead underwriter of initial public offerings in the U.S., the companies said Wednesday.

Under the terms of the deal, Credit Suisse First Boston agreed to pay $90 a share in cash to DLJ's public shareholders, which hold about 30% of the company. That represents a roughly 10% premium over DLJ's closing price Tuesday of $82.25. The remainder of the shares are held by AXA Financial (AXF) and its affiliates. Credit Suisse will pay $5.75 billion in stock and $2.39 billion in cash to AXA.

Shares in DLJ rose on the news, closing up $4.38, or 5%, at $88.38 after reaching a 52-week high of $88.63. The announcement followed a day of extraordinarily heavy trading in DLJ's shares, which Tuesday gained $16.44, or 25%, to close at $82.25, after hitting a 52-week high of $82.38 as news services reported that takeover talks were under way.

Shares of AXA ended up 6 cents at $52.31 after reaching a 52-week high of $55.13.

The tracking stock for DLJDirect (DIR), the online trading arm of DLJ, fell $2.44, or 22%, to settle at $8.56, erasing its gains Tuesday when it climbed $2.25, or 28%, to close at $10.19. The tracking stock will continue to trade on the New York Stock Exchange under the ticker symbol DIR.

The deal, which requires the approval of DLJ shareholders and federal regulators, would combine two firms with remarkably similar assets.

A wholly owned subsidiary of Zurich-based Credit Suisse Group, Credit Suisse First Boston has investment banking, financial advisory, sales and trading operations in more than 37 countries. It employs more than 15,000 people. The unit had revenues of around $9.8 billion in 1999, and it reported $7.8 billion in equity and $275 billion in assets as of Dec. 31, 1999.

New York-based DLJ deals in securities underwriting, sales and trading, merchant banking and financial advisory services. With roughly 139 million shares outstanding, an acquisition of DLJ would be worth about $11 billion at current market prices.

Together, the combined companies' heft in underwriting would be exceeded only by Goldman Sachs (GS), which raised $15.57 billion, according to figures from Thomson Financial Securities Data. Combined, Credit Suisse and DLJ raised $9.35 billion, while Morgan Stanley Dean Witter (MWD) led $9.18 billion of initial public offerings.

The transaction is expected to close in October of 2000, and the merged firm will take the Credit Suisse name. Joe Roby, chief executive of DLJ, will be chairman of the executive board, while Allen Wheat, the chief executive of Credit Suisse, will retain his post.

The deal follows recent consolidation in the investment banking industry, most notably Swiss investment bank UBS' (UBS) agreement in July to buy PaineWebber (PWJ) for about $10.8 billion. More recently, MONY Group (MNY) agreed to buy Advest Group (ADV) in a complicated deal that values Advest at close to $275 million.

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