Schroders may buy US affiliate

SCHRODERS, the British merchant bank, has discussed raising its 50 per cent stake in Wertheim Schroder, its US affiliate. It could buy all the remaining equity in a deal that would net the US partners and other minority shareholders up to dollars 150m (pounds 102m), writes Rupert Bruce.

'Of course we would like to do something, but it is always two people who would have to agree,' said Georg Mallinckrodt, chairman.

Discussions so far have centred on whether raising Schroders' stake or buying out the remaining equity would improve the business. But the partners who own most of Wertheim Schroder's remaining equity would lose their autonomy.

'You always have the point where you look at things and you say it would be a lot easier to deal with that problem or this problem if we all had the same profit-and-loss account. My instinctive feeling would be that it would not be an event that would take another two years,' said Mr Mallinckrodt.

Schroders bought 50 per cent of Wertheim Schroder's voting shares in 1986. The managing partners hold the other 50 per cent of the voting shares, while the Bank of Boston, Massachusetts Mutual Life and Mitsubishi Trust Bank each have small non-voting stakes equivalent to 4.9 per cent of the total equity.

The two banks have integrated very successfully. The Americans have given the other parts of Schroders access to their US institutional client base and they have been able to raise capital from Schroders' international branch network.

Schroders considers it vital for an investment bank to have a global presence. This is a common ideology followed by the likes of Morgan Stanley, Goldman Sachs and others.

Martin Green, an analyst at Smith New Court, says he estimates it would cost dollars 125m- dollars 150m to buy the remaining 50 per cent. Schroders could certainly afford it. The bank revealed inner reserves of pounds 101.6m (at 31 December) with its results this week. Pre-tax profits for 1993 rose 85 per cent to pounds 195.8m and exceeded analysts' expectations.

In a further sign of Schroders' financial strength, earnings per share of 109.2p covered the 16.5p dividend more than six times.

Wertheim Schroder was involved in more than 40 financings, totalling more than dollars 6bn.

Wertheim Schroder refused to comment.

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