One can imagine tense, closed-door negotiations between a small cadre of Legg Mason Inc. and Citigroup Inc. executives, hunched over calculators and paperwork, trying to decide how the companies would swap parts of their businesses.
But that's just it - one can only imagine.
Neither company has confirmed nor denied reported talks on a multibillion-dollar deal in which brokers at Legg Mason, the Baltimore-based investment-management firm, would be traded for mutual funds and other client assets at Citigroup, the world's biggest financial services company.
Since the story broke June 1, officials have noted corporate policy barring comment on "market rumors."
Asked whether that means the reports are false, a Legg Mason spokesman declined to say but suggested looking up "rumor" in Webster's dictionary. (It's defined as "general talk not based on definite knowledge.")
Companies, especially large public corporations, grapple with rumors all the time, including some that they plant themselves. Some disappear like a passing cloud, but other times, speculation becomes so rampant that it drives a stock price, dampens employee morale and hurts customer relations.
Recent changes in disclosure rules have made it more difficult for a company to discreetly dispel rumors or respond to them.
"Once things get out into the marketplace, it behooves them to try to reach a deal or move on as quickly as possible because rumors like this do turn out to be distractions," said Franklin L. Morton, who supervises research on the financial services industry at Chicago-based Ariel Capital Management.
As with past proposals for corporate marriages that have leaked to the public, Legg Mason and Citigroup are under pressure to temper uncertainties that have rippled through their companies. Employees, instructed not to speak with the media, privately wonder about job security as headhunters reportedly have descended on Legg brokers. Clients inquire about the future of their investments.
Legg Mason stock jumped $2.63, or 3 percent, the day the news broke and has slid back 2 percent since then to close at $84.84 Friday. Citigroup stock has lost less than 1 percent, closing at $47.64 Friday.
Companies typically hold their cards close to the vest because they are bound by laws and rules aimed at giving everyone from day traders to major money managers the same shot at information that could prompt them to buy or sell.
Congress first tried to level the playing field as far back as the Securities Act of 1933, which required companies to give investors financial information.
As the dot-com investment craze waned in 2000, regulators raised the bar higher with Regulation FD, which prohibits companies from releasing information to favored investors before dispensing the news publicly to ordinary investors.
Public relations experts say the best approach is to present a merger, in which most of the details have been worked out and the companies have signed an agreement, to all constituencies at the same time. That means no leaks, they said.
"You can't talk to the Street without talking to the employees. You can't talk to clients without talking to the Street," said Elliot Sloane, who started Sloane & Co., a public relations agency in New York that handles "crisis" situations. "It has to be one communication."
Last year, banking giants Wachovia Corp. and SouthTrust Corp. dealt with a similar situation when their merger leaked days before an announcement.
So did SBC Communications Inc. and AT&T; Corp., whose combination was rumored before the deal was sealed and revealed this year.
Newspaper chain Pulitzer Inc. said it was considering selling itself last year and then left observers in limbo for months until publicizing an acquisition by Lee Enterprises Inc. in January.
People familiar with the way corporate-merger talks are conducted describe a limited group of negotiators who are instructed to keep quiet, often working around the clock and on weekends.
"I've lost a lot of sleep," said Maryann Waryjas, an attorney at the Katten Muchin Rosenman law firm who has represented companies such as Illinois Tool Works Inc. in acquisitions.
Waryjas said the secrecy surrounding such negotiations is designed to protect participants, who could get into trouble if they reveal a potential deal to someone who then buys or sells stock because of the information, an illegality known as insider trading.
The secrecy also protects a company's reputation if a deal falls through, leaving investors wondering why one or both of the companies wasn't desired.
"It's sort of like being left at the altar," Waryjas said. "It can create the impression in the market that a company is damaged goods, and no one wants that."
Still, leaks happen.
In many cases, "there is an enterprising reporter or a big-mouth somebody," said Sloane, who has handled public relations for Gemstar-TV Guide International and Kmart Corp. He said companies could also be forced by stock exchange regulators to explain behind-the-scenes discussions if rumors cause too much volatility in the markets.
Under Securities and Exchange Commission rules, companies have four days to announce significant events that shareholders should know about, such as bankruptcy or a definitive agreement on a merger or partnership.
The clock starts ticking from a public relations standpoint even before a final deal is reached if word has gotten out, said Paul Holmes, a consultant and editor of Holmes Report, a newsletter for the PR industry.
"They should let as little time as possible go by," he said.
The wait is on at Legg Mason. Perhaps the most anxious of the interested parties are employees who could be affected by a swap, depending on how it's structured.
Analysts speculate that Citigroup would keep Legg Mason's 1,540 brokers but that 115 investment bankers and about 280 back-office personnel who handle brokerage transactions might be laid off.
Citigroup has a much larger and respected investment-banking division, and it maintains its own back office. "I wouldn't want to scare anyone about their jobs," said Matt Snowling, an analyst at Friedman, Billings, Ramsey Group Inc. "But I wouldn't want to be an investment banker at Legg right now."
Analysts don't agree on what would happen to Citigroup's fund managers. They theorize that Legg Mason could take all of Citigroup's $460 billion in assets or only Citi's Smith Barney and Salomon Brothers mutual funds, which hold more than $50 billion.
Analysts also said that clients who are unsure where their brokerage account would end up or which company would be handling their investments might be reluctant to take their business to Legg Mason and Citigroup while the rumors persist.
Legg Mason was in a similar situation last year, when it reportedly tried to buy part of Merrill Lynch & Co. Inc. That deal didn't materialize.
"The real risk we see is a deal not getting done, as this marks the second time" Legg Mason has been in the news over a deal, Buckingham Research Group analysts William R. Katz and Michael Kim wrote last week.
"Legg Mason now has to get a deal done to reduce business attrition," they wrote. "The longer such uncertainty continues, the higher the odds of defection and/or stepped-up recruitment efforts by key competitors for brokers, institutional sales personnel, traders and star investment bankers."