Credit Suisse takes over US broker

Credit Suisse graphic swissinfo.ch

The Swiss bank, Credit Suisse, is to buy the New York brokerage, Donaldson, Lufkin and Jenrette (DLJ), for $11.5 billion (SFr19.67 billion). It comes just two months after Switzerland's biggest bank, UBS, acquired the United States broker, PaineWebber.

Credit Suisse announced on Wednesday that it would merge DLJ with its investment-banking arm, Credit Suisse First Boston (CFSB). It added that the DLJ board had already approved the offer.

Credit Suisse believes the deal is a strategic move to consolidate and cement its position as a major player in investment banking.

Credit Suisse spokesman, André-Lou Sugar, told swissinfo the acquisition was “definitely a reinforcement of its position as one of the leading investment banks in the United States and globally as well.”

The Swiss bank will acquire a 71 per cent stake in DLJ from the broker’s largest shareholder, the French insurance giant, Axa, for $8.1 billion or $90 per share. Axa will receive 30 per cent of the payment in cash and 70 per cent in Credit Suisse shares.

In September, Credit Suisse will open a cash tender offer in the US for the remaining 29 per cent of the shares held by DLJ’s public shareholders.

Credit Suisse said it chose DLJ because it opened new opportunities for CFSB. “The advantage [of the acquisition] is that we will be to be able to work together with specialists in different sectors of investment banking. We could therefore develop our investment banking and capital gathering sectors which are two very important activities,” Sugar said.

Credit Suisse said DLJ would make an “important contribution” to the group’s asset management and private banking business in the US. It will boost the bank’s assets under management by $120 billion to a total of $842 billion.

Wednesday’s announcement follows UBS’s purchase in July of the brokerage firm, PaineWebber, in a deal worth an estimated $10.8 billion. Markus Gisler, editor of the Swiss business weekly, Cash, says the two acquisitions are very different.

“PaineWebber is largely a portfolio company, where they invest the money of clients. Whereas DLJ is a classic investment bank where they mainly trade in junk bonds and their second big market is issuing shares,” Gisler said.

Major Swiss banks have been actively seeking partners abroad. Gisler believes Credit Suisse is trying to strengthen its global position in investment banking.

“There is a clear top-tier group of investment banks on Wall Street and it is naturally the strategic aim of Credit Suisse to become a part of that group. By aquiring DLJ, it would make Credit Suisse a member,” Gisler told swissinfo.

He says Credit Suisse and UBS are looking for a larger role in global financial activity.

“The longer the whole merger story world-wide lasts, you see that you need very strong partner banks in order to do big deals. In order to be part of the big game, you basically need to line up and this is probably the reason why DLJ is for sale.”

The news boosted DLJ’s shares on Wall Street, but Credit Suisse stocks fell by over four per cent on the Zurich bourse when the deal was announced on Wednesday.

swissinfo with agencies