Revealed - what Credit Suisse really thinks about BZW

`The Independent' was yesterday able to listen in to a highly confidential global video conference held for Credit Suisse First Boston's managing directors in London, New York and Hong Kong to discuss and celebrate the acquisition of BZW's equities and investment banking business on Wednesday. John Willcock reports.

Merely by quoting "Project ********" to a telephone operator yesterday, The Independent was able to access a private video conference for CSFB's top brass, during which they gloried in the acquisition of BZW's equities and investment banking divisions this week for a paltry pounds 100m.

During the half-hour conference they forecast mass sackings in the London- based bank's back office activities, and further redundancies among some of the investment bankers where they overlapped with CSFB.

A UK executive boasted of the "carrot -and-stick" methods CSFB was using to get BZW employees to sign up for the Swiss bank. "Every top manager has signed as well as 200 top people," the UK director said. The "staff retention plan" operated by CSFB offered them 3 years vesting stock in CSFB as the carrott, and the stick was represented by lengthy non-competition clauses.

Allan Wheat, chief operating officer of CSFB, chimed in from New York, answering another director's question as to why the bank had not bought the Asian and Australian bits of BZW, as it had originally offered to do. Mr Wheat explained that the Asian operations were for the most part start-ups which were not profitable, that there were too many locations to cover. Asia was "too big a bite for us". Specifically, Mr Wheat said, BZW's Japan business was "a loser".

"We haven't anyone to send there." Then to raucous laughter from his fellow directors, Mr Wheat added: "I don't know anyone I dislike enough to send there." He concluded: "We chickened out on that."

Back in London, a UK-based director said that for the pounds 100m paid to Barclays, CSFB is getting pounds 150m net assets, while the staff retention plan will cost pounds 50m. "No goodwill [was paid for] in this transaction," the director said. He added: "We will keep [BZW's] space in the Barclays building -- we will rent space from then on fairly cheap terms."

The integration of the two banks will be "very complex", said the director. It will involve a charge from earnings of pounds 100m after tax, which will be taken as an extraordinary charge, "so the P&L dosesn't suffer, and savings flow directly to the bottom line". He added: "The net cost to us [of the acquisition] will be pounds 175m.

We're taking about 800 front office people," he said, while the number of information technology and back office people to be kept on was under negotiation. CSFB wants to take "obviously as few as possible," he added. "We will probably take on a few hundred."

Mr Wheat said that at a recent internal conference in Miami, the bank's top brass had pondered the need to expand beyond its core strengths, fixed income and derivatives, as well as the need to bolster its activities in Europe and the UK, where "we kinda lack critical mass''.

BZW will almost perfectly complement some of these weak areas, he said. For instance, BZW's research team will increase the number of UK companies covered by the bank by more than 400, he said.

Mr Wheat then said that the original figure had been put down as nearly 450 companies, but he had not wanted to admit how few companies CSFB already covered in London - to a barrage of laughter from his fellow directors. He then ducked naming a precise figure for how many BZW people would be fired. He said: "To be very honest we've been trying to recruit their investment bankers for years - particularly those recruited over the last year. There will be some redundancies - but the business compliments it [CSFB] very well."

One British questioner asked why two American investment banks, Donaldson Lufkin Jenrette (DLJ) and Bankers' Trust walked away from table in the final stages of the battle for BZW.

Mr Wheat said: "DLJ has about 20 or 40 people in Europe - period." He added that the original deal offered by Martin Taylor, chief executive at Barclays, had been "all or nothing". DLJ had concluded that "this thing is just too big a bite."

Bankers' Trust dropped out of the bidding because, Mr Wheat said, it was "not viewed as a preferred employer by [BZW's] employees."

Commerzbank was extremely interested, but the employees didn't want to be employed by Commerzbank or ING, "so that was the end of that," he said. "Bankers' Trust is now going after NatWest."

And so, the conference drew to a close, and a great British name in investment banking disappeared into the history books.