Update: Chase/J.P. Morgan Reveal Details of Merger

Updated from 9:06 a.m. EDT

And now, the details.

In a widely expected announcement, Chase Manhattan (CMB Quote) said Wednesday that it had agreed to acquire J.P. Morgan (JPM Quote) in an all-stock deal valued at close to $36 billion.

The deal, which brings together two of the nation's oldest financial institutions, has been approved by both boards.

Each share of J.P. Morgan stock will be exchanged for 3.7 shares of Chase stock. Based on Tuesday's closing prices, the deal values J.P. Morgan at a 8% premium to the market. J.P. Morgan closed Tuesday at $183.88 per share, while Chase Manhattan closed at $53.75.

The new company will be called J.P. Morgan Chase & Co., and will be a formidable new player on the global finance scene with $660 billion in assets. On a pro forma basis, J.P. Morgan Chase would have had net income of about $7.5 billion last year on revenue of $31 billion.

Executives from both companies will share power in the new firm. Douglas Warner III, chairman and chief executive of J.P. Morgan, will become chairman of the new company. William Harrison, chairman and CEO of Chase, will become president and CEO of J.P. Morgan Chase. The board of directors of J.P. Morgan Chase will consist of eight members from the current Chase board and five members from J.P. Morgan's board. Warner and Harrison will co-chair the firm's executive committee, its senior policy making management group.

The investment banking and asset management division will be known globally as J.P. Morgan, while the retail business -- which includes credit cards, regional consumer banking in the New York tri-state area and Texas, mortgage banking, consumer lending and insurance -- will retain the Chase name.

The merger is expected to result in about $1.9 billion in pre-tax cost savings by the end of the second year following the completion of the deal. The deal is expected to close in the first quarter of 2001.

The companies said they anticipate costs associated with the merger of about $2.8 billion, a portion of which will be taken as a charge once the deal closes.

The histories of both firms are entwined in the history of the U.S. itself. J.P. Morgan was founded in 1861, and rescued the country's financial system after a panic forced a run on banks and a collapse of Wall Street in 1907. The incident led to the creation of the country's first central bank, the Federal Reserve, in 1913.

The corporate descendant of Chase Manhattan is Manhattan Bank, formed in 1799 by Aaron Burr, a one-time vice president of the U.S. perhaps more famous for killing Alexander Hamilton in a duel. Manhattan Bank financed the Erie Canal and merged with Chase National Bank -- formed in 1877 and named for Treasury Secretary Salmon Chase -- in 1955.

Chase closed Wednesday regular trading down $2.13, or 4%, at $50.69. Meanwhile, J.P. Morgan closed down $4, or 2%, at $181.50.