Swiss prepare to break up Warburg

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Britain's premier investment bank was preparing to be dismembered by a Swiss rival yesterday in an ignominious end to its role as the leading player at the top of the City's list of blue bloods.

SG Warburg said it had been approached by Swiss Bank Corporation - which wants to buy all its investment banking operations - and would evaluate the offer before making further comment. This leaves more than 2,000 Warburg employees and another 3,000 world wide awaiting news of their fate.

Warburg advises over half of Britain's biggest companies on raising capital, takeovers and mergers, as well as dealing in stocks and shares. It handled Britain's biggest privatisation, British Telecom. Until last summer it was seen as the great British hope for building a truly global investment bank, able to take the giant US firms such as Goldman Sachs head on.

But recent lacklustre stockmarkets and the fall-off in merger activity in its home markets of Britain and Europe have hit Warburg hard. In December last year a proposed merger with Wall Street Investment bank Morgan Stanley fell through, spelling near panic for Warburg.

Rumours of a takeover bid for Warburg then followed, coming to a head yesterday when its shares rose 46p to 821p. The stockmarket thought that Smith Barney, an American retail stockbroker, would bid for Warburg. Then the London Stock Exchange closed and Warburg was forced to disclose it was in discussions with the Swiss.

Almost all of Warburg's profits come from its fund management arm, Mercury Asset Management, of which it owns 75 per cent. Under the proposed deal with SBC, Mercury will become fully independent. SBC are expected to pay about £600m £800m for the British bank.

Hopes crumble, page 32

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