Chase Buys Robert Fleming

Chase Manhattan (CMB Quote), the No. 2 banking group in the U.S., said Tuesday it had agreed to acquire Robert Fleming Holdings, the U.K. investment banking and asset management group, in a cash and stock deal valued at $7.7 billion.

Under the terms of the agreement, the deal is composed of 2.57 billion pounds ($4.08 billion) in cash and $3.62 billion worth of Chase common stock. The stock portion of the deal is subject to a collar under which Chase will not issue less than about 36 million shares or more than about 44 million shares.

The new company will be called Chase Flemings.

The agreement will enable the New York-based bank to take over one of the last remaining independent financial groups in the U.K. and to build its presence in Europe and Asia. In January, Schroders sold its investment banking business to Citigroup (C Quote), the No. 1 U.S. banking group, for 1.35 billion pounds ($2.14 billion).

Fleming also announced it had agreed to sell to T. Rowe Price Associates its 50% interest in an existing joint venture between the two companies for $780 million. Fleming and T. Rowe Price jointly managed non-U.S. investments for institutional clients and 13 T. Rowe Price-sponsored mutual funds.

The sale will be consummated immediately after the closing of the Fleming transaction with Chase, with the proceeds of the sale accruing to Chase.

While the acquisition of Fleming is not likely to help Chase catapult itself into the top leagues of the global investment banking world, it will give the company a boost in the world of European and Asian equities and mergers and acquisitions.

"If you like the growth prospects for Asia and Europe, then you will like this transaction,'' said William B. Harrison, Jr., chairman and chief executive of Chase. "Fleming brings leadership positions in global asset management and international equities, excellent potential for earnings growth and a culture of partnership.''

The deal follows Chase's December acquisition of Hambrecht & Quist, a technology-focused investment bank based in San Francisco.

Fleming has about $100 billion under management, approximately 80% of which is in international equities. Flemings also has an institutional equity securities business in Asia, through Jardine Fleming.

Chase currently has $232 billion of assets under management, primarily in fixed-income, cash management and U.S. equities.

Chase estimated that for the fiscal year ending March 31, 2000, Fleming had earnings of approximately $290 million, excluding the Fleming/T.Rowe Price joint venture, of which about $200 million was earned in the last six months of the period.

The acquisition is expected to be completed in approximately three to four months.

Chase Securities acted as financial advisor to Chase Manhattan.

Chase closed down 2 1/8, or 2%, at 86 Tuesday.