Chemical, Chase Merge Into Financial Giant Deal Returns Chase Manhattan To Top Of Industry

Chemical Bank ing Corp. and Chase Manhattan Corp. agreed to merge in a $10 billion stock transaction that will create the biggest banking company in the United States, the banks said Monday.

The combined company - to be called Chase Manhattan - will have $297 billion in assets, outranking Citicorp, at present the largest U.S. bank company with $257 billion in assets.

The blockbuster merger, rumored to be in the making since last month, comes amid a wave of large bank deals, as financial institutions combine forces to grow revenues and garner more customers. A $2.1 billion merger between Cleveland, Ohio-based National City Corp. and Pittsburgh-based Integra Financial Corp. also was announced Monday.

The rapid pace of takeovers in the industry helped push Chase and Chemical together, Thomas G. Labrecque, Chase’s chairman and chief executive said at a news conference this morning.

“If one wants to pick one’s partner and do the thing when the appropriate opportunity is there, then this was the time,” Labrecque said.

The merger combines two of banking’s most storied companies.

Chase Manhattan Bank was partly founded by Aaron Burr and later named for Salmon Chase, the treasury secretary whose face is on the $10,000 bill. It later became synonymous with John D. Rockefeller Jr., who merged his Equitable Trust with Chase National Bank to create the world’s largest bank 65 years ago.

The merger with Chemical, if approved, will move Chase past Citicorp to reclaim the title of largest U.S. bank, but it still will trail several Japanese and European banks.

Ironically, Chemical is considered the dominant power in the merger. Chemical, which takes its name from its roots as a chemical company, is the nation’s fourth-largest bank; Chase, the sixth-largest. While both banks are strong in the New York metropolitan area, Chemical also is a major player in Texas.

The decision to keep the Chase Manhattan name reflects its historic value.

“Chase is a better known name and has considerable value,” said Charles Vincent, a bank analyst at PNC Securities Corp. in Pittsburgh.

The Chemical-Chase merger, expected to close by March 1996, will result in 12,000 job cuts from a combined staff of 75,000 in 39 states and 51 countries.

With the outlook for revenue growth cloudy at both Chemical and Chase, the merger makes sense and rightens prospects for both institutions, said Vincent.

“Banks are under severe pricing and competitive pressures, that’s the driving force behind all the mergers,” he said. “This is very much an inmarket merger and they can reduce a lot of expenses.”

Chase and Chemical are in many of the same businesses - mortgages, credit cards, small business lending, securities trading, corporate banking and international banking. Operations will be merged and staff will be cut to achieve $1.5 billion in annual cost savings, the banks said.

“We are seizing upon a truly unparalleled opportunity to create a premier global financial services company,” said Walter Shipley, chairman and chief executive officer at Chemical.

“The combination is a unique strategic fit, with complementary product capabilities and market coverage that will give us leadership positions across all our major business lines,” he said.

The new Chase will be the No. 1 consumer and business bank in New York. Analysts doubted the merger will face antitrust problems because, even though it will have the greatest share of the market, there are so many banks in New York that consumers still have plenty of choices.

“It’s a very unconcentrated market,” said Howard Adler, a banking lawyer at Gibson Dunne & Crutcher in Washington, D.C. “It’s the easiest market in the world to have a merger of two big institutions.”

Shipley said that merger-related cost savings and savings from lower deposit insurance premiums will be passed on to consumers in the form of better rates on interest-bearing deposit accounts and lower fees for other bank products, but he said it’s too early to know how prices will change.

The merger is subject to regulatory and shareholder approvals.

“A bank merger of this size is going to be looked at very closely,” said Steven Sunshine, a recently departed top Justice Department antitrust attorney now with Shearman and Sterling in Washington, D.C.

The combined entity will also have huge national and global banking businesses. The new Chase will have 25 million customers across the nation and rank third in mortgage lending and fourth in credit cards. The bank will also be a global leader in several corporate banking businesses, including securities trading and safekeeping, corporate loan syndications and funds transfers.

The boards of directors of both companies approved the merger agreement Sunday. Under the agreement, 1.04 shares of Chemical stock will be exchanged for each of Chase’s shares, making the deal worth about $10 billion.