NEWS AND COMMENTARY
September 6, 2000
Deutsche Seen Stalking J.P. Morgan: Report Pushes U.S. Investment Bank Shares To High
By Andrew Bulkeley, FTMarketWatch
Rumor News Gives Dow Lift That Won't Last ... Weiss comments
FRANKFURT - J.P. Morgan & Co. (JPM) shares rose as much as 7.5% to a 52-week high after a German business magazine reported that Deutsche Bank was planning to bid for the U.S. investment bank.
J.P. Morgan shares jumped 12 1/16 to 172. German weekly WirtschaftsWoche reported in a pre-release of Thursday's edition that Deutsche Bank (DE), Germany's largest bank, will make an all-share bid and will speed a planned U.S. listing to help in the purchase.
The magazine didn't cite a source or give a price.
Deutsche Bank is working to transform itself into a global investment bank and has already snapped up Bankers Trust as part of the goal. The company is also looking for partners for its retail arm to boost sales while cutting costs.
Deutsche refused to comment on the report. The bank's shares fell 1.8% to 96.25 euros in evening Frankfurt trading.
J.P. Morgan shares already got a boost last week when Credit Suisse Group (CSGKY) said it would pay $11.5 billion for broker Donaldson, Lufkin & Jenrette (DLJ), putting a spotlight on Wall Street banks without an international partner.
In July, Credit Suisse domestic rival UBS (UBS) snapped up U.S. broker Paine Webber (PWJ) in a similar move.
Not all financial mergers have succeeded. Deutsche earlier this year called off merger plans with rival Dresdner Bank, Germany's third-largest bank, over differing investment banking strategies. The two had hoped to bundle their investment activities while handing their retail activities to insurer Allianz.
The rumor that Deutsche Bank is making a play for J.P. Morgan sent the Dow soaring over 140 points and created a frenzy for stocks in the financial services sector. Meanwhile, most other stocks are plunging today. The Dow clearly would not have fared as well today if it wasn't riding J.P. Morgan's coattails. And remember, "buy on rumor" is always followed by "sell on news."
Moreover, this acquisition is a disaster in the making for Deutsche Bank. We know that they want to get listed in the U.S., but J.P. Morgan is one of the most vulnerable investment banking firms in the world. It routinely trades in $9.6 trillion worth of high-tooting fancy financial derivatives, the kind that shot down Long Term Capital Management in Sept. 1998 and nearly knocked the global financial community to the canvas. Good luck to Deutsche Bank! They'll need it.