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Credit Suisse Confirms Donaldson, Lufkin & Jenrette Purchase

Jason Gorringe, Tax-news.com, London

31 August 2000

Following intensive bid speculation, Swiss financial services giant Credit Suisse's investment banking arm, Credit Suisse First Boston (CSFB), signed a definitive agreement yesterday to buy Donaldson Lufkin & Jenrette (DLJ), the New York-based stockbroker which is 70 per cent owned by French insurer AXA, in a U$11.5bn deal.

If the deal goes through, a combined CSFB and DLJ will become a force to rival its two biggest investment banking rivals in the US, Goldman Sachs and Morgan Stanley Dean Witter. If CSFB does acquire DLJ, it will be the second move into the US in two months by a Swiss bank. In July CSFB's bitter rival, Union Bank of Switzerland (UBS), bought US brokerage firm PaineWebber for US$10.8bn from General Electric.

CSFB already has a strong interest in investment banking, as well as private banking, asset management and insurance. The deal will not only bolster its investment banking operations, but will give Credit Suisse a hefty presence in junk bonds and merchant banking, as well as a retail online brokerage business - DLJdirect - and a strong back-office business in clearing stock trades. It is understood that CSFB was particularly interested in DLJ's private client operation, in which 450 sales staff look after wealthy customers with US$50bn in assets.

CSFB will pay US$90 per share in cash and stock for DLJ, representing nearly three times book value. Credit Suisse appears to be paying more than rival UBS did for PaineWebber in its bid to strengthen its Wall Street position - UBS itself was said to have overpaid substantially. Claudia von Turk-Knobloch of Swiss private banking firm Pictet & Cie said that the deal was "strategically very interesting" but that its success would depend on whether CSFB could retain DLJ's key staff. In fact CSFB has allocated $1.2bn for staff retention purposes, which sounds as if it might help a little.

Swiss analysts are reserving their judgement on the deal until they quiz management at today's investment analysts meeting which was called to cover the publication of Credit Suisse's first half results. Bank Sarasin estimates that Credit Suisse Group will increase its first half net income by 27 per cent, to SFr3.4bn. Pictet has plumped for SFr3.65bn.

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