Robertson deal latest in bank moves on Wall St

Electronic News, June 16, 1997 by Carol Haber

In the latest in a series of moves linking the commercial banking and securities industries, BankAmerica Corp. said it will acquire San Francisco-based investment banking boutique Robertson, Stephens & Co.--which specializes in corporate finance work for technology companies, among others--for $540 million.

The marriage would expand the equity underwriting opportunities for the bank while infusing a substantial amount of capital into the investment house. The latter is linked to such recent high-profile IPOs as Rambus Inc. and NeoMagic and has an entourage of clients in the technology sector. The deal would also fuel the the investment house's overseas expansion; BankAmerica, a commercial bank, has operations in 38 countries.

Based in San Francisco, the bank, which is located in the same building as its potential acquisition, is paying $245 million in cash up front, and $225 million in deferred compensation to Robertson partners, which will be distributed in equal amounts over a period of three years, according to a Robertson spokesperson. The bank reportedly will pay an added $70 million in compensation over four years to pivotal Robertson employees.

The price tag was termed "rich" by many, five times Robertson's book value, but tax effects are said to alleviate some of the imbalance. Robertson logged revenues of $370 million in 1996. It has 800 employees, and 65 partners, the latter having approved the BankAmerica offer recently. No layoffs are expected and Robertson will operate independently as a subsidiary, it was said.

The investment house's approximately 60 percent orientation toward technology will remain unchanged, the Robertson spokesperson noted, with the company long espousing growth companies/industries and having selected technology as the hottest of the hot. No projects will be put on hold, she said; if anything, they will be pursued "with renewed vigor" in light of the infusion of capital to come.

The closely held investment house--meaning most of the voting stock is held by a few shareholders--also does corporate finance work for companies in health care, retail and real estate.

'Buy-And-Build' Strategy

"It's basically a buy-and-build strategy," the Robertson spokesperson told Electronic News. "We are looking at the synergies that the two firms can provide. BankAmerica offers a lot of resources and provides additional capital so that we can continue to grow as a global player in the investment banking field...This liaison with a big bank just enhances our clout."

Asked whether this could mean increased foreign underwritings for the investment house, a BankAmerica spokesperson hesitated to say.

The deal, which is subject to regulatory approvals, is expected to close in 4Q97.

In a prepared statement, BankAmerica CEO David A. Coulter said: "We expect, with this addition, to build a platform from which to offer our clients a broader range of equity underwriting and other investment banking and investment management services than we are currently able to provide."

Also in the prepared statement, Robertson Chairman Sanford R. Robertson stated: "Along with a common cultural vision, (BankAmerica) brings to our firm significant capital, an extensive client base, and fixed income capabilities."

BankAmerica has sold its Security Pacific financial services unit for $1.6 billion to the Travelers Group; it is expected that these funds will help finance the Robertson deal.

In similar transactions, SBC Warburg recently revealed plans to buy Dillon, Read for $600 million in stock, while Bankers Trust New York Corp. offered to buy Alex. Brown in a stock swap reportedly worth about $1.7 billion. Many expect similar deals down the road between profit-hungry banks eager to participate in what is seen as the red-hot equity markets, especially for technology, and other investment banking firms which are at the forefront of the tech financing scene, such as Robertson rivals Mongtomery Securities, Cowen & Co. and Hambrecht & Quist.