Directors of Bankers Trust Corp., the New York bank that acquired Alex. Brown Inc. of Baltimore 14 months ago, are scheduled to meet today amid speculation that it will be acquired by Deutsche Bank AG of Germany in the largest takeover of an American financial institution by a foreign bank.
Rumors have circulated for weeks that Deutsche had its eyes on Bankers Trust, which has stumbled in the aftermath of several missteps abroad and is considered vulnerable to a takeover.
Deutsche, Germany's largest banking company, has coveted a position in the U.S. market, and has reportedly agreed to pay between $7.36 billion and $9 billion for Bankers Trust.
Bankers Trust executives could not be reached for comment last night. But sources confirmed that the board will meet, although they could not provide details of the proposed acquisition.
Executives involved in the talks say the two companies are on the verge of signing an agreement, the New York Times is reporting today.
There were no immediate details on how a deal would affect Alex. Brown, and company executives could not be reached for comment yesterday.
Deutsche Bank was founded nearly 125 years ago in Berlin. It has 2,355 branches in Germany and abroad, and a staff of 76,141, according to its 1997 annual report.
Like other large financial institutions, Deutsche Bank is under pressure to expand its operations and become a global force. It has stated in recent months that it wants to build its business in the United States.
In 1989, Deutsche Bank expanded into the brokerage and investment banking business by acquiring Morgan Grenfell PLC for more than $1 billion so it could compete head-to-head with Merrill Lynch and Goldman, Sachs & Co., which are among the largest U.S. brokerage houses.
But the marriage between the two companies has been rocky. As Deutsche Bank built the operation, costs escalated, and the bank scaled back its attempt to build an investment banking business. When that happened, decision-making left New York and was again centered in Frankfurt, where Deutsche is based. More than 200 executives left the company.
By acquiring Bankers Trust, Deutsche Bank could fill its investment banking hole with BT Alex. Brown, which is well-known and widely respected for taking young, fast-growing companies public.
Alex. Brown, for example, was the lead manager in the initial public offerings of Microsoft Corp., Starbucks Coffee Co., Outback Steakhouse Inc. and software maker Oracle Systems Corp.
BT Alex. Brown also offers Deutsche a strong private client division, which services the needs of wealthy investors, and a brokerage business.
The Baltimore firm, the oldest investment banking house in the country and employer of about 1,500 people in the area, has experienced considerable turmoil since its takeover by Bankers Trust in a deal valued at $1.7 billion.
The Sun reported a week ago that many Alex. Brown employees were worried about their futures, especially with repeated reports that the New York-based parent company could be bought out.
Several of the most senior executives, including the heads of its investment banking and asset management operations, have left.
"We went from having a solid business that everyone understands to one that has a new surprise every day," an Alex. Brown executive said, speaking on condition of anonymity.
Technically, Bankers Trust is a commercial bank, but its focus has been investment banking, especially with its recent moves into equities-related businesses. The biggest move was to purchase Alex. Brown. It also bought National Westminster PLC's European equities business and the U.S. investment banking boutique Wolfensohn & Co.
Bankers Trust, the country's seventh-largest bank, lost millions of dollars after betting big on Russian securities, and it became entangled in an international hedge-fund scandal that made multibillion-dollar bets around the globe and nearly failed.
In September, Bankers Trust reported a $350 million loss from trading in Russian securities, and was forced to pay $300 million as part of a $3.5 billion bailout of high-flying Long-Term Capital Management LP, a hedge fund that was on the brink of failure.
And last month, Bankers Trust stunned Wall Street by announcing a $488 million loss in the third quarter.
The bank will take a restructuring charge, which analysts said could wipe out profits for the fourth quarter.
Frank N. Newman, Bankers Trust's chairman and chief executive, recently told analysts that the company will emerge from its problems stronger, more focused and less risky. He said it will be a company that can perform well in good times and bad.
Shares of Bankers Trust stock have taken a beating -- falling as low as $49.18 from a high of $136.437. The stock has recovered some of that, and closed Friday at $77.25.
Deutsche is a sprawling banking operation involved in everything from real estate lending to financing multinational businesses to mutual funds.
If it acquires Bankers Trust, Deutsche would become the world's fourth-largest fund manager. It would also pick up Bankers Trusts' "junk bond" business, which ran into problems in the third quarter and is being scaled back.
With $2.3 trillion in assets, Bankers Trust would give Deutsche Bank several businesses that include overseeing securities for investors, trust operations and handling cash transfers from one bank to another.
But the acquisition "would not necessarily be an end to the building process," Michael Mayo, an analyst at Credit Suisse First Boston, said in a recent report.
"Bankers Trust's transaction and trading culture is not an ideal fit for Deutsche."
Several other financial services mergers are having a difficult time bringing different corporate cultures together. Citigroup, for example, last month dismissed its president and heir-apparent James Dimon.
"It is always hard to adjust when a new owner comes in," Joan T. Goodman, a bank analyst at a Chicago-based division of Donaldson Lufkin & Jenrette, told The Sun. "Each place has a different culture. I have known a fair number of brokers who have ended up with banks and are unhappy."
Pub Date: 11/22/98