Staff at Robert Fleming and members of the Fleming family are set to face a collective tax bill of more than £250m after the investment bank is taken over by America's Chase Manhattan for £4.5bn this week.
A deal had been expected last Monday, but negotiations hit a last-minute hitch over Rowe Price Fleming, the bank's US joint venture, which was only resolved after Roddie Fleming, the chairman, flew to the US last week and agreed to exclude the business from the sale. An announcement may be madetoday.
Chase had hoped to include the business, which has £21bn of funds under management, in the sale. But Chase was unwilling to pay the kind of amounts that would have prevented T Rowe Price, the joint venture partner, from insisting on exercising its pre-emptive rights on Fleming's 50 per cent share in the business.
The Fleming family, who are advised by Sir John Craven, the former head of Morgan Grenfell, and Donaldson Lufkin & Jenrette, the US investment bank, are understood to have agreed a price of £28 a share.
That is a touch lower than the £30 a share the family were asking for, but more than double the £12-a-share price at which Fleming shares were valued before negotiations started under the complex formula under which they can be traded.
The Inland Revenue has already been in touch with family members to let them know that it cannot any longer regard that formula as an accurate reflection of the market value of their holdings.
Because of the potential tax liability, some holders may elect to take Chase stock instead of cash. Likewise, Chase is hoping to be able to use a combination of stock and deferred bonuses to lock some key Fleming personnel in place.
Bernard Taylor, head of corporate finance, who some thought might join Roddie Fleming in setting up a new investment banking boutique, is believed to have decided to stay. Mr Fleming is also likely to stay for a transitional period to ensure that the integration process goes smoothly.
The deal is likely to be the first test of the new rules the Chancellor of the Exchequer has introduced to reduce the tax bills for entrepreneurs selling stakes in business by extending the 10 per cent taper for capital gains tax.
Many of Fleming's 7,500 staff are shareholders, with staff holding a total of 15 per cent of the shares. Other family members are believed to hold a further 14 per cent, either directly or through trusts.Reuse content