Tech bankroller H&Q acquired by Chase

NEW YORK -- Chase Manhattan Corp., the nation's second-biggest bank, on Tuesday said it would buy San Francisco-based Hambrecht & Quist Inc. for $1.35 billion in cash to extend its reach in the lucrative investment banking business.

The bank, which has made no secret of wanting to expand its presence in the securities business, said it would pay $50 a share -- a 22 percent premium -- for the West Coast investment bank, known for its dominant niche role in the rapid-growth business of taking technology companies public.

Chase (NYSE:CMB) is a leading corporate lender but has expressed a desire to round out its equities business by bolstering its investment bank. With this aim, the bank held unsuccessful talks with top brokerage firm Merrill Lynch and Co. Inc. last year.

Both Chase and Hambrecht & Quist (NYSE:HQ) have been linked with other brokerages and banks as potential deal partners in recent months, following last year's industry consolidation that gave rise to powerful, rival full-service financial services companies like Citigroup Inc.

Hambrecht & Quist's stock price closed at 41-1/16 on Monday, then jumped to 49 in pre-open trading on Tuesday. Chase's shares finished at 74-2/16, but were quiet before the opening bell.

Extends Chase's investment base
"The acquisition of Hambrecht & Quist is an important strategic move for Chase," William Harrison Jr., Chase's president and chief executive, said in a statement. "It extends Chase's one-stop investment banking range of products in the highest growth sectors of the U.S. economy, where media, telecommunications, information technology and the Internet converge."

Hambrecht & Quist, whose recent third-quarter profits rose 167 percent to $37.1 million, began in 1968 and has since helped take public such high-flying tech companies as Amazon.com Inc. Nasdaq:AMZN), Netscape Communications (NYSE:AOL) and Apple Computer Inc. (Nasdaq:AAPL). In this deal, it would assume the Chase name and remain based in San Francisco.

Operationally, it would join Chase's investment banking arm, run by James Lee. Daniel Case III, chairman and CEO of Hambrecht & Quist, would become chairman and CEO of Chase Securities West and head of Chase's global technology group, the companies said.

As part of the deal, Chase would set up a $200 million retention pool of its own stock, payable over four years, to keep key Hambrecht & Quist employees. The retention of top investment bankers is vital in an acquisition, because the business thrives on these bankers' personal relationships with companies.

The agreement has been approved by the boards of both companies and is expected to be completed by the end of this year.