and JOHN WILLCOCK
Michael Marks, chairman of Smith New Court, is to meet Evelyn de Rothschild today to seek his backing for the sale of Britain's top stockbroker.
SNC is said to be asking a minimum price of 550p a share from each of its two competing suitors, Merrill Lynch, the US investment banking giant, and Commerzbank, one of Germany's biggest universal banks. The price would value SNC at around pounds 500m.
Each rival purchaser is believed to have indicated there will be no offer without an irrevocable agreement from Sir Evelyn to sell his 26 per cent stake. When informed at the beginning of this week by Smith New Court that it was in takeover talks, Sir Evelyn is said to have reacted angrily because he had not been consulted earlier.
Executives close to the negotiations said yesterday it was impossible to predict which way Sir Evelyn, chairman of NM Roths- child, and a famously unpredictable figure, would decide. He is flying from Switzerland specially for the key meeting.
"If he has another game to play, we expect him to start dealing his hand tomorrow," a source said yesterday. Sir Evelyn's family bank stands to make about pounds 100m from a sale of Smith New Court.
Neither Commerzbank, which yesterday confirmed its interest, nor Merrill, which refused to comment, are reported to have put forward a formal bid. But both have given a rough idea of what they are prepared to offer. Merrill, one of the world's biggest securities houses, has flown 50 executives into London to lay siege to Smiths.
Asked yesterday why such a big team had been assembled in London, a Merrill source said they were in London for the Harrods sale.
Herb Allison, number three at Merrill, and the executive vice-president in charge of corporate and institutional business, and Jerry Kenney, executive vice-president responsible for corporate strategy, are leading the US house's negotiating team. Commerzbank, which has a far smaller team in London, is being advised by Lazards.
Mr Allison, former head of investment banking, is said to be a formidable figure who possesses the most detailed knowledge about Merrill's worldwide operations.
Smith's side is being handled by Phoenix Securities, which specialises in financial services deals. As both suitors battle toe-to-toe for Smith's international equities expertise, Merrill Lynch was told yesterday that "the wind is blowing in its direction", according to well-informed sources.
The two rivals offer very different attractions for SNC.
The advantage of Commerzbank from the UK broker's perspective is that it is a relative newcomer to the investment banking business, and would therefore be heavily reliant on it to do the building. This would give SNC some autonomy.
The worrying factor is that because Commerzbank is starting from so far behind, the international expansion in securities could be too slow for the pace of competition.
For fear of being outpaced by bigger rivals Dresdner and Deutsche in international investment banking, Commerzbank is keen to enter the fray. Acquiring international equity distribution powers is also seen as key to keeping domestic corporate customers happy.
Merrill Lynch, by contrast, is an investment banking behemoth. SNC would be swallowed, but it would be part of an already formidable business that still lacks the necessary presence in Europe. SNC's role would be more restricted, but would offer the advantage of operating at full throttle from the outset.
Merrill Lynch has transformed itself from America's biggest retail broker to one of the world's biggest financial intermediaries, with global investment banking operations as well. It has done more cross-border financings than any other firm in the world for the past six years. David Komansky, chief executive, gave the go ahead earlier this month for Merrill to concentrate worldwide expansion plans in Europe.
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