By DAVID USBORNE
NEW YORK - The consolidation of the global financial industry is gathering pace with confirmation that Credit Suisse is to buy Donaldson, Lufkin & Jenrette, the seventh-largest US investment firm, for $US13.4 billion ($31.37 billion ) in cash and stock.
Overlap between the firms' activities has raised fears of layoffs once the merger is complete.
The combined companies would have 26,000 employees worldwide.
Speculation also grew that the deal would trigger a new wave of consolidation of Wall Street's second-tier firms.
Credit Suisse said it would pay $US90 a share for Donaldsons, which is almost three-times current book value.
As part of the deal, Axa Financial, a subsidiary of French insurer Axa, is selling its 71 per cent holding in Donaldsons to Credit Suisse for $US8.1 billion.
Credit Suisse intends to fold Donaldsons into its investment banking subsidiary, Credit Suisse First Boston.
CSFB has headquarters in London and New York and will keep its present name.
This is the second bold move by a Swiss bank in the past few months. In July, UBS, the largest Swiss banking group, announced plans to swallow the New York-based brokerage PaineWebber in a deal worth $US11 billion.
With additional mergers widely expected, all eyes will be on firms such as Bear Stearns, Lehman Brothers and JP Morgan. Three players - Merrill Lynch, Goldman Sachs and Morgan Stanley Dean Witter - control more than 50 per cent of the underwriting and mergers businesses.
Credit Suisse has set aside a bonus pool worth $US1.2 billion to retain Donaldson employees. But most analysts agreed that a deep paring of the payroll was inevitable.
Pre-tax cost savings from the deal will reach between $US750 million and $US1 billion by 2002, Credit Suisse said.
Officials at CSFB insisted privately that no more than 2600 people - 10 per cent of the combined workforce - would eventually lose their jobs. But some analysts predicted the final tally could be twice that number.
Joe Roby, who will be chairman of the combined firm, underplayed the threat of layoffs in Europe, where business continues to grow.
"Each of the firms needs more firepower in Europe than either of them can provide separately," he said. Donaldsons' New York office would probably take the harshest cut in staff.
The combined companies promise to be a formidable force.
Donaldsons is adding its sizeable junk bond business into the deal as well as its private equity operations with $US125 billion in assets under management.
For the first half of this year, the combined bank would have ranked fourth in global equity underwriting and third in advising on mergers and acquisitions.
The deal will boost Donaldsons in Asia and Europe and give it greater access to high-tech initial public offerings.
Donaldsons has struggled to become a global force, although it has doubled its workforce to 11,300 in the past four years.
It has also been one of the most generous firms on Wall Street, with compensation accounting for 54.6 per cent of its revenue in the second quarter.
Credit Suisse said the merger would greatly strengthen CSFB's "position as one of the world's leading investment banking services."
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