Chase Manhattan Case Study
Table of Contents
Rationale of the Merger 2
Overview of the Banks History 2
Analysis of the Banking Market 2
Motives behind Merger and Acquisition Transactions 2
Rationale behind the Chase-Chemical Merger 4
Relative Merits of a Merger and an Acquisition 5
Present Value of the Gains from the Merger 6 Estimating the Exchange Ratio 8
Overview: 8
Problem Definition: 8
The Expected Market Exchange Ratio: 8
The Acquiring Premium: 9
The Expected Value Added of the Merger: 9
The Expected Value Added of the Focus Program: 10
Proposed Solution: 10
Ex-Post Analysis: 11
Literature 12
List of Tables
Table 1 Estimated Impact of Merger between Chemical and Selected Banks 4
Table 2 Beta Calculation 7
Table 3 Banks merger premium multipliers in the US during 1995 9
List of Figures
Figure 1 Projected Growth in Online Banking 4 Rationale of the Merger
Overview of the Banks History
In 1955 Chase National Bank and the Manhattan Company merged with Chase Manhattan Bank. David Rockefeller, who became Chairman of Chase in 1969, was significantly involved in the merger. By the end of the 1979s Chase evolved to the third largest Bank in the United States (U.S.). In the 80s Chase saw itself confronted with difficulties, which were caused by investments in bad real estate loans. In the year of 1990 Chase suffered from a record loss of $1 billion. The company however managed to regroup and presented a solid balance sheet in the next four years leading to the merger (Gilson and Escalle, 1998).
Chemical Banking Corporation was formed in 1824. In 1844 it became the Chemical Bank of New York and eventually completely left the manufacturing business seven years later. During the period from 1946 to 1972 Chemical was able to seriously increase its assets (from $1.35 billion to $15 billion). At the same time Chemical acquired several banks, enabling it to
Rationale of the Merger 2
Overview of the Banks History 2
Analysis of the Banking Market 2
Motives behind Merger and Acquisition Transactions 2
Rationale behind the Chase-Chemical Merger 4
Relative Merits of a Merger and an Acquisition 5
Present Value of the Gains from the Merger 6 Estimating the Exchange Ratio 8
Overview: 8
Problem Definition: 8
The Expected Market Exchange Ratio: 8
The Acquiring Premium: 9
The Expected Value Added of the Merger: 9
The Expected Value Added of the Focus Program: 10
Proposed Solution: 10
Ex-Post Analysis: 11
Literature 12
List of Tables
Table 1 Estimated Impact of Merger between Chemical and Selected Banks 4
Table 2 Beta Calculation 7
Table 3 Banks merger premium multipliers in the US during 1995 9
List of Figures
Figure 1 Projected Growth in Online Banking 4 Rationale of the Merger
Overview of the Banks History
In 1955 Chase National Bank and the Manhattan Company merged with Chase Manhattan Bank. David Rockefeller, who became Chairman of Chase in 1969, was significantly involved in the merger. By the end of the 1979s Chase evolved to the third largest Bank in the United States (U.S.). In the 80s Chase saw itself confronted with difficulties, which were caused by investments in bad real estate loans. In the year of 1990 Chase suffered from a record loss of $1 billion. The company however managed to regroup and presented a solid balance sheet in the next four years leading to the merger (Gilson and Escalle, 1998).
Chemical Banking Corporation was formed in 1824. In 1844 it became the Chemical Bank of New York and eventually completely left the manufacturing business seven years later. During the period from 1946 to 1972 Chemical was able to seriously increase its assets (from $1.35 billion to $15 billion). At the same time Chemical acquired several banks, enabling it to