Swiss Bank Corporation is to pay $600 million (370.3 million) to buy Dillon Read, the Wall Street investment bank, as part of its attempt to become one of the worlds leading investment banks. Dillon Read, a partnership which specialises in mergers and acquisitions, is to be merged with SBC Warburg, the investment banking division of SBC which will be renamed SBC Warburg Dillon Read.
Thursdays announcement follows the collapse of talks between Dillon Read and ING, the Dutch financial group which owns 25 per cent of the Wall Street firm. David Solo, chief operating officer of SBC Warburg, said he expected the merger to be completed within three months, maybe just two.
Franklin Hobbs, president and chief executive officer of Dillon Read, is to become head of corporate finance worldwide for the new division and Francois De Saint Phalle, vice chairman and chief operating officer of Dillon Read, is to become deputy head of equity capital markets worldwide and co-head of the United States equities.
Solo said the deal was being financed with existing SBC stock and would not result in a material dilution of earnings. It represents about three times book value.
Solo worked with Hans de Gier, SBC Warburg executive chairman, to negotiate the deal with Dillon Read executives.
The deal requires regulatory approval, including that of the US Federal Reserve Board.
Solo said that payment of the shares to Dillon Read partners would be staggered over the next two and a half years.
Financial Times and that senior executives had signed contracts which would stop them working as competitors for a lengthy period if they resigned. The deal will strengthen SBC Warburgs small corporate finance operation in the US and help it win more international mergers and acquisitions business. SBC will also be seeking to exploit Dillon Reads research department and equity issuing business. According to Securities Data, which tracks transactions, Dillon Read ranks 16th in mergers and acquisitions in the US for the year to date, with a market share of 2.1 per cent - slightly ahead of Deutsche Morgan Grenfell, but behind UBS. In equity underwriting, Dillon Read is 19th, with a market share of just under 1 per cent, ahead of UBS. Competitors said that the deal was one of the most significant acquisitions by a European bank in the US since Credit Suisse took control of First Boston.
