NationsBank Corp. said yesterday that it will buy Chicago Research and Trading Group Ltd., one of the world's largest options and government bond trading firms, for $225 million in cash.
CRT performs securities risk-management services for its clients, trading in so-called "derivatives," or products derived from underlying financial instruments or commodities, such as stocks, bonds, currencies and oil. Some common derivatives include options, futures and interest-rate swaps.
"On our own we can provide some of the complex products that our corporate customers need," said NationsBank Chairman and Chief Executive Officer
Hugh L. McColl. "But frankly, not enough."
Yesterday's announcement came while NationsBank is waiting to conclude its proposed acquisition of Baltimore's MNC Financial Inc., which would make the Charlotte, N.C., company the largest banking company in Maryland.
Retail customers of NationsBank probably won't notice the acquisition of CRT, Mr. McColl said. But NationsBank expects to use CRT to attract and retain large corporate clients who otherwise would have to do their portfolio risk management business with companies such as J. P. Morgan and Bankers Trust New York Corp.
The CRT purchase would also add to NationsBank's growing portfolio of nonbank operations. In February, the company completed its acquisition of Chrysler First Inc., a consumer financeunit of the automaker that services more than $4.5 billion in consumer loans. And last fall, NationsBank announced a joint venture to sell securities with Dean Witter Financial Services Inc.
NationsBank officials said the acquisition should add 8 cents to 10 cents a share to NationsBank's annual earnings once the consolidation is complete. The stock market reacted negatively yesterday, driving the company's shares down $1.25, to close at $55.
CRT has 750 employees, $250 million in capital and offices in cities around the world. It owns more than 150 memberships on 19 securities exchanges and trades approximately 75 options and futures contracts on interest rates, equity indexes, petroleum and foreign exchange, as well as other instruments.
The company's CRT Government Securities Ltd. subsidiary is one of 38 primary dealers that reports to and trades U.S. government securities directly with the Federal Reserve. That alone could help NationsBank trade its own nearly $20 billion portfolio of Treasury securities.