Goldman Sachs partners in talks on flotation

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The Independent Online
PARTNERS in Goldman Sachs, one of the few remaining privately- owned investment banks, discussed floating the firm at meetings over the weekend, sources close to the firm said yesterday.

The news has fuelled speculation that partners will vote on the issue at their annual meeting in a fortnight's time. Partners in Goldman Sachs could net up to $100m (pounds 60m) each if plans to float the company are approved.

Prominent London-based partners include Gavyn Davies, the leading UK economist with close ties to Labour, and Peter Sutherland, formerly an EC trade commissioner.

Two hundred Goldman Sachs managers could each receive a "consolation prize" of up to $5m, according to banking sources. The windfalls would be an attempt to compensate the so-called "marzipan layer" of management, who would miss out on the chance to attain the coveted status of partner if the bank were to decide on a flotation.

Members of Goldman's partnership committee and operating committee are believed to have discussed the issue of flotation at a two-day meeting at the end of last week.

Jon Corzine, the chairman and chief executive, was present, as was Henry Paulson, who was yesterday appointed as Mr Corzine's co-chairman and chief executive, the third time the firm has had co-chief executives in 25 years.

Other members of Goldman's ruling executive committee were not believed to have been present at the meeting - which was convened to address a whole range of strategic issues.

The company has already considered - and decided against - flotation on six occasions, most recently in 1996, when Mr Corzine ruled out the option after informal discussions at the bank's annual general meeting. Some sources estimate Mr Corzine, a long-standing partner, could net a much as $800m (pounds 480m) if the float goes through.

Opponents of flotation say it would destroy Goldman's unique partnership culture which many see as being the foundation of the firm's success. Others, though, believe the firm needs the capital if it is to keep up with its acquisition-hungry rivals like Travelers and Morgan Stanley Dean Witter.

Stock market conditions are also ripe for a flotation, with financial stocks achieving record ratings. Analysts believe the 130 year-old partnership could be worth $20bn (pounds 12bn), a price tag which would result in windfalls of $60m for even the most junior partners, according to estimates.

When Goldman Sachs was mulling the issue of flotation back in 1996, analysts reckoned the bank could trade at a maximum of 1.5 times book value, putting a value on the partnership of up to $10bn (pounds 6bn).