WEEK IN REVIEW: DEMUTUAL ADMIRATION SOCIETY NORTH

Demutualization is spreading north of the border. Manufacturers Life Insurance Co., the country’s largest life insurer with assets of $54

billion American, will try to make an IPO next year in what it calls an effort to stay competitive. Two weeks ago, No. 5 Mutual Life of Canada announced the same thing.

Takes a licking,

keeps on ticking

Spokeswoman Gertrude Erismann said Union Bank of Switzerland had not – so there – lost $1.3 billion trading on its own account last year. In a statement of

Clintonian precision, she said the report in a London newspaper was “completely out of proportion.” UBS is soon to join with Swiss Bank Corp. to form the world’s second-largest bank.

Strong views

shift in wind

Dick Strong, 55, who only a little while ago said he wouldn’t sell Strong Capital Management no matter what, now says he’s talking to investment bankers. He says he’s “not looking to sell,” but has decided never to say never. Wonder how much the $21.6 billion his three dozen funds managed would fetch?

On the wagon

Vanguard Group of Valley Forge, Pa., knows a good bandwagon. It’s starting three more index funds to track Standard & Poor’s Mid-Cap 400 Index, S&P’s Small-Cap 600/Barra Value Index and S&P’s Small-Cap 600/Barra Growth Index.

There is life

after mergers

A.B. “Buzzy” Krongard, who ran Alex. Brown Inc. before Bankers Trust New York Corp. bought it in September and has been vice chairman of the bank ever since, found a government job. Starting next month, he’ll be counselor to the director of central intelligence, the guy who runs the CIA. Maybe there’s a merger with the KGB coming up.

A rake’s progress?

Another transition from the financial services area is that of Deutsche Morgan Grenfell Inc.’s James Murren. He’s heading from New York to Las Vegas to become chief financial officer of MGM Grand Inc., with a seat on the board. His former title was director of gambling, leisure and lodging coverage.

Asian flu:

part deux

Disaster loom
s in Indonesia – and for the 32-year reign of President Suharto. The stock market has lost half its value this month and Finance Minister Mar’ie Muhummad says there are too many companies with foreign debt – it totals $65 billion – for the government to do anything.

Treasury Secretary Robert Rubin said the effect of Asia’s woes on the U.S. is moderate – and the next day the rupiah fell to its lowest level ever, 16,000 to the buck. But that didn’t stop earnings at J.P. Morgan & Co. and trading revenue at Merrill Lynch & Co. and Donaldson Lufkin & Jenrette from taking a big Asian hit.

On the bright side, South Korean and Thai indexes are up for the year, showing that it might be better to trip and get up than just to shuffle along.

Meanwhile, elderly investors rioted in Hong Kong after a brokerage folded with their life savings. And in Tokyo, the Japan Securities Dealers Association, a self-regulatory body, voted to raise its maximum penalty for “grave violations of the law” to $3.9 million.

Sex and the single brokerage employee

Merrill Lynch & Co., with one eye on Washington and the other on Albany, is planning a new policy that would allow workers to sue it on discrimination charges, if all else fails. The company is currently trying to settle a sex-discrimination suit by former employees as both the Securities and Exchange Commission and New York State’s attorney general are looking at hiring practices in the industry.

Oh, when the Saint goes chargin’ in

St. Paul Cos. won approval from both boards to buy USF&G in a stock swap worth $3.5 billion. The new company would become the eight-largest property and casualty insurer in the United States. USF&G is in Baltimore; St. Paul is in Minnesota’s capital.

Oops, my mistake

Charles Schwab & Co. backed down quickly from its plan to put research reports written by analysts at other companies online when the other companies – Schwab’s competition, that is – squawked. Of course the broker-by-the-bay had made it worse by advertising that its
cybercustomers could “avoid the potential conflicts of registered brokers who are compensated on a commission basis.” The wirehouses who pay the writers of the reports with some of that commission money took umbrage, and First Call, the Boston Internet outfit that was supposed to provide the reports to Schwab, took the fall. “We overestimated the willingness of the brokers to participate,” Bruce Fador, its CEO, told the Wall Street Journal.

A girl’s best friend?

The American Stock Exchange introduced Diamonds, a stock basket based on the Dow Jones Industrial Average. On Wednesday, the first day of listing, 1.7 million units were traded, the highest first-day volume ever. Diamonds are shares in Diamonds Trust, an open-ended unit investment trust that tracks the Dow 30. Amex expects volume to stabilize at about a million a day.

Broker bags

biggest bucks

Royal Bank of Canada paid Tony Fell, its brokerage chief, $4.4 million last year, the top financial services pay north of the border. That’s twice as much as the country’s biggest bank paid its chairman and CEO, John Cleghorn. Stockholders are not expected to dance the Maple Leaf Rag at news of the total.

1997

top financial services mergers

Target Acquirer Value ($mm)

CoreStates Financial First Union Corp. 16,804.79

Barnett Banks Inc. NationsBank Corp. 14,491.09

HFS Inc. CUC International Inc. 1,4137.2

Morgan Stanley Group Inc. Dean Witter Discover & Co. 10,438.34

U.S. Bancorp First Bank System Inc. 8,739.79

4th quarter

banks

Target Acquirer Value ($mm)

CoreStates Financial Corp. First Union Corp. 16,804.79

First Of America Bank Corp. National City Corp. 6,980.23

AT&T Universal Card Unit Citicorp. 3,500.00

First Commerce Corp. Banc One Corp. 2,755.38

Deposit Guaranty Corp. First American Corp. 2,614.53

insurance companies

Target Acquirer Value ($mm)

American Bankers Insuarance American International 1,952.19

CapMAC Holding
s Inc. MBIA Inc. 606.59

Canadian General Insurance General Accident PLC 433.00

White River Corp. Harvard Private Capital Group 399.83

Principal Health Care Coventry Corp. 375.00

brokers and money managers

Target Acquirer Value ($mm)

Mercury Asset Merrill Lynch & Co Inc. 5,230.00

Oppenheimer Capital Pimco Advisors LP 850.00

Piper Jaffray Cos. Inc. U.S. Bancorp 695.61

International Dairy Queen Berkshire Hathaway Inc. 585.00

Oasis Residential Camden Property Trust 394.42

source: Mergerstat

Companies had an urge to merge in ’97

Financial services accounted for one-third of the staggering 7,772 mergers and acquisitions negotiated by U.S. companies last year, as deal volume soared 40.1% over the 1996 total to a record $653.5 billion.

The best came last: the largest merger deal ever – WorldCom Inc.’s $35.2 billion agreement to buy MCI Communications Corp. – and the largest-ever financial services acquisition both came in the fourth quarter.

Seven of the year’s 10 largest deals were by financial services companies, according to data released by Mergerstat, a division of the Los Angeles investment bankerHoulihan Lokey Howard & Zukin.

Topping the list: Charlotte, N.C., banking giant First Union Corp.’s record $16.8 billion bid for Philadelphia’s CoreStates Financial Corp.

Experts don’t expect deal activity this year to match 1997’s pace, but they say the consolidation wave is far from over.

Towers Perrin’s Donald McNees predicts banking mergers will shift to the Midwest. Some likely players? Banc One Corp., First Chicago NBD Corp. and KeyCorp.

Howard Kapiloff