Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, July 22, 1995 TAG: 9507240045
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Merrill, which bested Germany's Commerzbank AG after a two-week bidding war, becomes the first big U.S. brokerage to join a feeding frenzy that had been dominated by continental Europe banks.
Merrill's price for Britain's No. 1 stockbroker firm ups the ante for a dwindling British industry pool of independent brokerages. The thriving London stock market is No. 3 in the world, behind New York and Tokyo, and Britain is seen as a launching pad for expansion into markets not yet dominated by major world investment banks.
For the global leadership in stocks, Merrill Lynch is paying a steep 2.4 times Smith New Court's book value.
``I think they are overpaying. They can afford it,'' said Perrin Long, an industry analyst with Brown Brothers Harriman & Co. in New York.
``There is a cost to being No. 1 regardless of where you are in the world, and it's all part of what Merrill was paying for this firm.''
In two weeks of talks with Smith Chairman Michael Marks and other senior managers, Marks and his advisers spent that time ``wringing the last nickel out of us,'' David Komansky, Merrill president and chief operating officer, told reporters at a New York news conference.
Merrill said the deal would slightly dilute profits this year and next. Its stock was unchanged at $55.121/2 per share in Friday's trading on the New York Stock Exchange.
Merrill and Smith New Court said the combined firm would have the largest stock research team in the world, with about 370 analysts. It would also be the leading underwriter of new stock issues and the largest trader of U.S. and British stocks and U.S. stocks of foreign companies based in Europe, Asia and Latin America.
The purchase, subject to approval by regulators and Smith shareholders, speeds an already intense consolidation of the global securities industry.
As traders and investors have demanded the ability to easily buy and sell securities from countries around the world, many firms have sought expansion in regions where they lack strength. Merrill executives said they envision utilizing Smith as a jumping-off point for expansion in South Africa, Malaysia, Thailand and other countries.
``By combining Merrill Lynch's global resources with Smith New Court's experience and relationships in non-U.S. equity markets, we expect to increase our business significantly around the world,'' said Merrill Lynch Chairman and CEO Daniel P. Tully.
Smith, with total assets of $6.9 billion, is dwarfed by Merrill's assets of $164 billion. Merrill already employs 2,000 people in Britain, next to Smith's staff of 950 in London.
by CNB