Fleming deal depresses Chase shares

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The Independent Online

Shares in Chase Manhattan fell sharply in New York after the bank admitted that earnings growth would be hit in the first year by its £4.88bn takeover of Robert Fleming, the City investment bank.

Analysts said the deal, which boosts the US bank's presence in Asia and Europe, made strategic sense, but was not the "big bang" solution it has been looking for to put it firmly in the bracket of the investment banking big-hitters like Morgan Stanley and Goldman Sachs.

Bill Harrison, Chase chairman and chief executive, insisted that the bank now had a platform on which to compete globally in investment banking and asset management. However, he would not rule out further deals.

Mr Harrison said the deal, while mildly dilutive in the first year, would enhance earnings from then on. But he admitted the bank would have to suspend its share buyback programme because of the adverse balance sheet impact of the deal. Chase shares fell $2 3/4 to $85 3/8.

The Fleming family should have little cause for complaint. The price, split £2,573m in cash and $3,622m in Chase shares, is well above the £3.5bn Commerzbank offered for Fleming last year and reflects the extent of the turnaround in the business. Fleming shareholders will receive £27.44 a share for their holding. Irrevocable undertakings in respect of 54.7 per cent of the share capital had been received before the deal was made public yesterday morning.