Dillon, Read & Co Inc
PRESS COVERAGE
A selection of newspaper articles regarding Dillon, Read and their relationship with ASA, PEFCO, Bechtel Corporation and Swiss Bank Corp.
Dillon, Read & Co Inc
PRESS COVERAGE
A selection of newspaper articles regarding Dillon, Read and their relationship with ASA, PEFCO, Bechtel Corporation and Swiss Bank Corp.
Dillon, Read Realigns Top Level
The New York Times - December 29, 1970 - P43
Dillon, Read & Co Inc, a prestigious investment banking concern, announced top-level changes yesterday in its executive structure.
Frederic H Brandi, 65 years old, will retire as chairman Thursday. He will be succeeded by August Belmont, who has been president of the concern since 1962. Mr Belmont will be 62 years old tomorrow.
Nicholas F Brady, 40, was elected president and chief executive officer. He joined Dillon, Read in 1954, the year he graduated from the Harvard Business School, and he has been a vice president since 1961.
Note - As of 1973 - Frederich Brandi is also a director of American-South African Investment Co, Ltd. August Belmont was also chairman of Nassau Associations Inc between 1958 and 1970 and as of 1973 was also a director of the US & Foreign Securities Corporation.
Note - it is worth mentioning that South Africa’s peak borrowing occurred between the period of 1972 and 1974. A brief outline of the events leading up to this are detailed below.
New Chief of Old-Line Firm
The New York Times, March 14, 1971
Over the fireplace in the sparsely furnished, spacious 10th floor corner office overlooking Wall Street and William Street hangs a photograph of C Douglas Dillon, former Ambassador to France, Under Secretary of State and Secretary of the Treasury, who once worked there as head of Dillon, Read & Co, Inc, investment bankers.
Before Mr Dillon occupied the post, it was held by James V Forrestal, who became the nation’s first Secretary of Defence after he left the New York financial community.
Since January 1 (1971), the office has belonged to Nicholas F Brady , 40-year-old, ambitious, well-tailored, athletic product of Yale and the Harvard Business School who has become president and chief executive of the firm, a Wall Street investment house with roots going back 141 years.
Like other old-line investment banking firms, Dillon, Read is facing increasingly tough competition from newer aggressive securities firms that have built up extensive distributing networks for selling stocks and bonds.
The shifts in rank among investment bankers over the past half century illustrate these competitive pressures.
In 1927, J P Morgan was the leader, followed closely by Kuhn, Loeb & Co and then Dillon, Read. In 1970, Morgan Stanley stood fifth, Dillon, Read 16th and Kuhn Loeb 18th.
Merrill Lynch, the biggest brokerage house, had replaced Kuhn Loeb as the second biggest underwriter over this 43-year span, currently ranking after First Boston. Lehman Brothers was the third largest underwriting house last year and Salomon Brothers, a leading bond trading firm, stood fourth.
In picking a new chief executive to meet this competition, Dillon, Read leap-frogged a number of vice presidents with longer time-in-grade and picked the man who has directed the firm’s entrance into municipal and corporate bond trading in the past two years. As chief executive, Mr Brady replaces Frederic H Brandi, who retired after more than 43 years with Dillon, Read. Last week, Mr Brandi was named chairman of the American-South African Investment Company Ltd, succeeding Charles W Engelhard, who died March 2.1971
Dillon, Read is invariably is described as “prestigious,” which means that it has been around a long time and has a long list of well established blue-chip clients.
In Dillon, Read’s case, it has helped raise more than $19 billion for corporations and public authorities since 1945. Goodyear Tire & Rubber, Mobil Oil, Trans World Airlines, the New York State Power Authority, Nippon Telegraph & Telephone and the Kingdom of Norway are among the 101 clients that have issued securities over the last 25 years.
As William Donaldson, Lukin & Jenrette, a friend of Nick Brady and a fellow Yaleman, assessed the investment banking industry today; traditional clients are less likely to stick with their traditional bankers just for old time’s sake. Firms like Dillon, Read start from an enviable position, he said, but the pressure is on them to offer more than just the old school tie.
Mr Brady, who has been in charge of hiring for Dillon, Read since 1965, agrees that the firm has needed to move into new fields, to attract men with more varied training and to hire women for real investment banking work and not just to be secretaries or statisticians.
Dillon, Read has its main office at 46 William Street in downtown Manhattan and one office in Paris, a branch that will be moved to London. Roughly 150 persons work for the firm, including 31 officers - a group Mr Brady characterises as a “small but highly competent group of financial problem solvers.”
According to William Donaldson, Mr Brady himself is a “good prototype of the best of the new breed of investment bankers with some of the qualities of the old.” He also said he was “not flamboyant” and “not a brilliant guy but a guy with good judgement,” competitive, discreet, affluent, ambitious.
In tracing its origins back to 1830, Dillon Read lists its oldest ancestral firm as Vermilye & Co, a firm that traded Government bonds during the Civil War, joined the New York Stock Exchange in 1880 and was merged into William Read & Co in 1905.
In the spring of 1914, Clarence Dillon, the son of Samuel Lapowski, a San Antonio merchant who had immigrated to Texas after the Civil War, joined William Read & Co in New York. Clarence Dillon, who had taken his mother’s maiden name, was made a member of the firm at 34. Mr Read died six days later, and Mr Dillon was chosen as its new chief executive. Later in 1921, the name was changed to Dillon, Read & Co.
Clarence Dillon sold a $55 million offering of National Cash Register Company common stock in the mid 1920’s, the largest public offering up to that time. He took control of the Dodge Brothers motor car company for $146 million and merged it with Chrysler. He re-organised Goodyear Tire & Rubber, adding $100 million to its capitalisation. He built up a personal fortune estimated at more than $100 million and he continues at 89 to be a holder of Dillon, Read voting stock.
In 1924, Dillon, Read formed United States & Foreign Securities, a trust cited by Robert Sobel in his book, The Big Board, as an example of the utmost in pyramiding.
The trust had three classes of stock - first preferred, second preferred and common. The bankers sold all the preferred and one-fourth of the common for $25 million, and they purchased the second preferred and three-quarters of the common for $5 million.
The price of the common eventually rose to $72 a share, and Dillon, Read, with an investment of about one-fifth that put into the trust by the public, eventually made between $30 million and $40 million on its $5 million.
Douglas Dillon, his son was graduated from Harvard, magna cum laude, in 1931 and went into the firm. In 1940, he went to Washington with James Forrestal, then president of Dillon, Read, who had left to become Under Secretary of the Navy. Since then, other Dillon, Read men have served in top Government jobs, including William H Draper, President Truman’s under-secretary of the Army; Paul Nitze, Assistant Secretary of Defense under President Kennedy, and Peter M Flanagan, Assistant to President Nixon.
Douglas Dillon lives on a 300-acre estate named Dunwalke in Far Hills, New Jersey, fox-hunting country where Nick Brady also grew up. At Yale, he was thought to be a relative of “Diamond Jim” Brady, the high-living son of a Cedar Street saloon keeper who made a fortune selling railroad equipment, but he was not. Nicholas Brady’s great-grandfather, Anthony Brady, an Albany, New York, capitalist was, in fact, a friend, but not a relative, of Diamond Jim.
Like August Belmont, now chairman of Dillon, Read, Mr Brady went to the St Mark’s School in Southboro, Massachusetts, an institution predominantly for rich children seeking to go to Harvard, Yale or Princeton.
Nick Brady was graduated from Yale in 1952, a class that produced John Barry Ryan III, great-grandson of an early partner of Kuhn Loeb; and Moreau D Brown Jr, a great-great-great-great-grandson of Alexander Brown, a founder of Brown Brothers Harriman. Yale 1953 products-William Donaldson and Dan Lufkin of Donaldson, Lufkin & Jenrette, and George Herbert Walker III, now with G H Walker & Co in Wall Street. These securities men are sometimes called the Yale Mafia.
After Yale, Mr Brady went to the Harvard Business School, got out in 1954 and joined Dillon, Read. By 1961, he was a vice president, frequently working to push or thwart the merger designs of corporate clients. During the conglomerate craze, he worked more often to ward off mergers or to find corporate marriage partners - more to the liking of Dillon, Read’s clients than some acquisition-crazed suitors.
Dillon, Read executives also were the shareholders for the oil-tanker financing schemes, and they owned Barracuda Tankers, the Liberian company that leased the ill-fated Torrey Canyon to the Union Oil Company of California prior to the ship’s breaking up off the English coast in 1967.
Edward Cowan estimated in his book, Oil and Water - The Torrey Canyon Disaster that an initial investment of $20,000 in Barracuda Tanker was expected to produce about $1 million in profits over 20 years.
Applying the maximum capital gains tax rate of 25 percent, the $375,000 in new profits would represent a profit pyramid that even the most sophisticated investor would find enticing and at practically no risk, Mr Cowan concluded.
Just last Thursday, the firm completed work on creating the Public Export Funding Corporation, a bank-owned organisation to finance exports of jet aircraft and other American-made heavy equipment.
PEFCO, as Public Export Funding is called, could become a significant force in the United States balance of payments. Its projections of export financings run into the multi-billions.
The firm whose direction Mr Brady has assumed gives the impression of being filled with men in their 30’s. It has become more attuned to the bond trading markets. It is seeking men from law firms and industry. A third generation Yaleman is acknowledging the need for more than just a school tie. Samuel Lapowski would probably concur.
Douglas Dillon Returns To Investment Concern
The New York Times, September 27, 1971
C Douglas Dillon is returning to the investment banking firm of Dillon, Read and Co, Inc, as chairman of the executive committee and a director, it was announced formally over the weekend.
Mr Dillon, 62 years old, left the firm in 1953 to enter Government service first as Ambassador to France, then as Under Secretary of State , and Secretary of the Treasury. He left the Government in 1965.
August Belmont will continue as chairman of Dillon, Read and Nicholas F Brady will continue as president and chief executive officer.
Mr Dillon, in separate but related and required actions, also has submitted his resignation as a director of the Chase Manhattan Bank and of the American Telephone & Telegraph Company.
Two former United States Secretaries of the Treasury, David M Kennedy and C Douglas Dillon have taken on business advisory posts.
The New York Times, March 22, 1973
Mr Kennedy, who was Treasury chief in the first Nixon Cabinet, has been elected a director of the Private Funding Corporation, the export-financing entity established in 1971 by 55 banks and 7 large industrial concerns in co-operation with the Export-Import Bank. He recently served as United States Ambassador to the North Atlantic Treaty Organisation and as Ambassador-at-Large.
Mr Dillon, who held the Treasury post under President Kennedy, has been appointed to the Chase Manhattan Bank’s international advisory committee. He is chairman of the United and Foreign Securities Corporation and chairman of the executive committee of Dillon, Read & Co.
Flanigan Returns to Dillon
The New York Times, January 22, 1975
Peter M Flanigan , who played a controversial role in the settlement of the _ _
Government’s antitrust case against the International Telephone and Telegraph Corporation, has been appointed managing director of Dillon, Read & Co Inc, a New York investment banking house. He was a partner in the company before he went to Washington in April, 1969.
Mr Flanigan served as assistant to President Nixon from April 1969 to January 1972 and then became both Assistant to the President for International Economic Affairs and director of the Council on International Economic Policy until August of last year.
He was nominated by President Nixon to be Ambassador to Spain, but the Senate never acted on the nomination, and Mr Flanigan asked President Ford to withdraw it.
Mr Flanigan’s new appointment with Dillon, Read is subject to approval by the New York Stock Exchange.
(Note - Peter Flanigan remained managing director of Dillon, Read until 1992, and is still a director today. He was also a member of the President’s Economic Policy Advisory Board between 1981 and 1988).
Bechtel Predicts Privacy of Services Will Match Well With Dillon Read
The Wall Street Journal, May 1, 1981
Affinities between the Bechtel family of San Francisco and the Wall Street Investment-banking firm of Dillon Read & Co may be stronger than most people realise.
The move this week by the family that controls the Bechtel Group, one of the world’s largest engineering construction companies, to acquire majority interest in one of Wall Street’s oldest concerns “may seem a very different thing from the things we’re used to, and in some ways it is,” says George P Shultz, president of Bechtel. But Dillon Read is a “personal service business, much like our engineering service business, with top-notch people serving clients individually,” says Mr Shultz, a former Treasury Secretary.
Dillon Read managing director Nicholas F Brady cites other common denominators between the two companies. The most important, he says, is the shared belief that running a business should be a private partnership.
“Someone once said that the last private partnership on Wall Street will inherit the earth,” Mr Brady said yesterday. “The classic investment banker is generally found meandering around the private firms. The private handling of private matters by private people makes sense.”
Bechtel, also privately held, has a reputation for being big, profitable and closed-mouthed. “They’re not just a private company,” says a Bechtel watcher in San Francisco. “They’re a very, very private and silent company.”
While many see an obvious match of styles in Bechtel and Dillon Read, executives of the two companies describe some of the more tangible business reasons for the alliance.
A Dillon Read partner mentions, for example, that Bechtel “provides professional engineering and construction services” to organisations like governments and huge corporations. “We provide professional investment-banking services to large entities,” the partner says, suggesting that the new union might bring both sides in contact with more such “large entities.”
Mr Brady elaborates - “You think of crows’ nests. The Bechtel organisation has a crow’s nest. They know about projects that are going on all over the world. We have the same sort of position on the Street.” Despite the advantages of the two crows’ nests, the two concerns have agreed to maintain their cherished confidentiality of client relationships. “We each have private relationships with each of our clients,” says Mr Brady. “That’s the most important thing to both our businesses.”
The vast but undisclosed financial resources of the Bechtel’s and their associates in Sequoia Ventures Inc, which is making the purchase for the family, will also add financial clout to Dillon Read, with capital estimated in the $30 million range. “Sequoia is a good-sized financial company,” says Mr Shultz. “We can add strength” through new equity capital.
Mr Shultz declines to say how much new money will flow into Dillon Read, but he notes that Sequoia’s assets are “well in excess” of $100 million and that Dillon Read “will be able to handle any size deal that comes along.” Bechtel Group had 1980 revenue of $7.6 billion.
The Bechtels plan no major changes for Dillon Read, except to provide the infusion of money. “We look to the current management of Dillon Read for leadership,” says Mr Shultz, who is also vice chairman of Sequoia.
Both concerns say, however, that the invigorated Dillon Read won’t branch out as some of its more aggressive competitors have. Merrill Lynch, Pierce, Fenner & Smith Inc, Goldman Sachs & Co, Morgan Stanley & Co and Salomon Brothers, for example, have all embraced the hurly-burly business of take-over stock speculation for their own accounts during the past decade, often earning huge sums. But Dillon Read traders consciously avoid taking positions in any stock that is a take-over target, market sources say.
And Dillon Read is among the few Wall Street firms that almost always refuse to represent the acquiring company in a hostile take-over.
“Dillon Read is not going to be all things to all people,” says Bechtel’s Mr Shultz. “The financial services business is evolving into an industry with larger and larger firms with wider and wider services. That makes us think there is a strong role to be played by people providing top-notch traditional services.”
The alliance between the two concerns grew from Dillon Read’s role in advising Bechtel on several major acquisitions in the past three or four years, Mr Shultz says. “They advised us on the purchase of Well-Tech Inc, as well as Dual Drilling Co. They also helped on various studies about engineering and construction work and our in-house thinking about new acquisitions.”
Mr Shultz’s “acquaintance” with C Douglas Dillon also helped. Mr Dillon was once Treasury Secretary, and the two men’s friendship has grown as Bechtel and Dillon Read have worked together. “When I was in Washington, Wilbur Mills told me to study the work of Doug Dillon,” says Mr Shultz. Wilbur Mills said “He’s the best witness we’ve ever had in front of the Ways and Means Committee.”
Mr Dillon and his family have agreed to sell their controlling interest in the investment banking firm to Sequoia.
Pressured by the Dillon family’s desire to sell its large stake, Dillon Read partners began talking in January with the top Bechtel men about buying their shares through Sequoia. Because both concerns are private and aren’t subject to financial disclosure requirements, the terms of the deal haven’t been disclosed and evidently won’t be.
Discussions with Bechtel pre-dated both the Shearson Loeb Rhoades Inc - American Express Co and Bache Group Inc. - Prudential Insurance Co mergers. But the Dillon Read deal underscores an important trend: Wall Street believes the stakes are getting higher.
“There is a revolution going on in the street,” says Dillon Read’s Mr Brady. “This alliance allows us to come up with our plans and act on them. This gives us the capital.”
Also on Mr Brady’s mind is the likelihood that the nation’s banks may soon be competing - head on - with the investment firms for underwriting business. “I don’t see any difference between American Express and Citicorp,” he says. “If American Express can acquire an underwriting firm, I don’t see why Citicorp shouldn’t ”.
Dillon Read’s Managers to Buy Control from Bechtel, Which Will Retain a Stake
The Wall Street Journal, March 8, 1983 - P2
New York - After vigorously denying three months ago that such a move was in the works, Dillon, Read & Co, said yesterday that the San Francisco-based Bechtel group will shed part of its controlling interest in the investment banking and securities firm.
The Bechtel group, known for its international engineering and construction business, will sell some Dillon, Read stock to the firm’s managing directors, which are the firm’s top executives and currently minority holders.
As a result of the sale, Dillon, Read’s managing directors will own a majority interest in the firm; Bechtel will retain a minority investment.
Neither ,Dillon, Read nor Bechtel, both closely held, disclosed the value of the transaction, or the exact number of shares to be sold. Sequoia Ventures Inc, a Bechtel-controlled investment concern, bought the controlling interest in 1981 from the Dillon family, presided over by C Douglas Dillon, a former Treasury secretary. It is believed that Sequoia currently owns about two-thirds of the firm’s shares.
The reshuffling stems from Dillon, Read’s initiative, according to Nicholas Brady, the firm’s chairman. Last year was a record one for the old-line investment bank, and the managing directors were pushing to gain a larger stake in the profit, he said.
Mr Brady returned to the firm in January after serving for a year as New Jersey’s interim US senator. Mr Brady took the seat vacated by Harrison Williams as a result of the Abscam affair.
Reports that Sequoia would dilute its Dillon, Read stake surfaced in December, but John Birkelund, Dillon Read president, insisted then that “there’s no change contemplated.”
Yesterday, Mr Birkelund said that in December the firm was considering an employee-bonus plan that entailed “increased ownership,” but that the plan to buy a controlling interest didn’t evolve until several weeks later.
The transaction makes Dillon Read one of a handful of major securities firms in which the employees hold a majority interest. Among the others is Goldman, Sachs & Co, Wall Street’s largest partnership. Morgan Stanley & Co and Drexel Burnham Lambert Inc, both closely held corporations.
The agreement to buy the Bechtel stock satisfies a long-held desire for greater ownership on the part of many managing directors. Before the Sequoia Investment was worked out in 1981, some of the managing directors had hoped that they would have the chance to acquire the Dillon family’s stake when it was sold.
The Bechtel-Dillon Read link that evolved instead was one of the more unusual combinations in 1981, a year that brought a rash of Wall Street take-overs, including the acquisition of Bache Group Inc, by Prudential Insurance Co of America, Shearson Loeb Rhoades Inc, by American Express Co, and Dean Witter Reynolds Organisation Inc, by Sears Roebuck & Co.
From the outset, it appeared that the Bechtel family and Dillon Read were aligned more in their general outlook than in their business activities. Both Dillon Read and the Bechtel engineering concern, Bechtel Group Inc, are intensely private organisations. And both companies have produced high-ranking government officials, chiefly during Republican administrations. Secretary of State George P Shultz was formerly the president of Bechtel Group. Peter Flanigan, currently a Dillon Read managing director, was a White House aide during the Nixon administration.
Since Sequoia acquired control, Dillon Read officials say there has been little interaction. One instance of collaboration involved a large energy project undertaken last summer by Mobil Corp and Saudi Arabian Basic Industries Corp. Bechtel Group provided engineering services: Dillon Read supplied financial advice.
Bechtel officials said that the investment stemmed from a desire to diversify beyond the engineering and construction businesses. They added that the Dillon Read investment was partly motivated by tax considerations, but they declined to say what these were, or how the Wall Street investment lightened the tax liability of the engineering concern or its owners.
Travelers Agrees to Purchase Dillon Read
The Wall Street Journal, July 16, 1986
Insurer to Pay $157.5 Million for Private Firm Known For Traditionalist Ways
Travelers Corp said, it agreed to acquire the privately held investment banking firm of Dillon, Read & Co for $157.5 million.
The big insurer’s acquisition of Dillon, Read, a 151-year-old firm known as one of the last bastions of investment banking’s traditionalist approach, continues the transformation of Wall Street into an industry increasingly dominated by giant financial services firms. Travelers, based in Hartford, Connecticut, said Dillon, Read would operate as an independent business unit with its management group intact.
Dillon Read had a book value of about $56 million at the end of 1985. The firm specialises in corporate finance and advising clients on mergers and acquisitions and leveraged buyouts.
Driven by a growing need to bolster their capital, many of Wall Street’s best known private firms are either raising money by selling shares to the public or becoming subsidiaries of capital-rich corporations. Most recently, for example, Kidder Peabody & Co, agreed in April to sell an 80% stake to General Electric Co for about $600 million.
Nicholas F Brady, chairman and co-chief executive officer of Dillon Read, said that the firm wasn’t in need of more capital and that its 35 managing directors weren’t clamouring to withdraw funds.
But he said Travelers will make available additional capital to Dillon Read that “could portend faster growth in some areas,” such as mortgage-backed securities. Dillon Read had total capital of about $85 million at the end of 1985.
Discussions between the two firms began about six weeks ago when Travelers approached Dillon Read for some advice on managing its assets, according to John P Birkelund, president and co-chief executive of Dillon Read. Shortly thereafter, he said, Travelers suggested the idea of a merger.
Mr Birkelund said Travelers will use Dillon Read to manage “an important part” of Travellers’ equity portfolio. Travelers agreed to invest some of its assets in domestic and international investment pools concentrating on mergers and acquisitions and leveraged buyouts that will be managed by Dillon Read.
Travelers won’t be the first firm to control Dillon Read. In 1981, the Dillon family sold its controlling interest in the firm to the Bechtel family, which controls San Francisco-based Bechtel Group Inc, for an amount that wasn’t disclosed. In 1983, Dillon Read bought back the majority of Bechtel’s stake, and late last year, the firm bought back the remaining Bechtel shares.
“It would seem silly” to sell control after recently regaining it, “but it’s not,” said Mr Birkelund. He said the firm’s 35 managing directors approved the Travelers merger because the possibility of “expanding our various businesses is very exciting.”
Dillon Read has made strides over the past few years in bolstering its activities in such high-profile businesses as advising on mergers and acquisitions. But it hasn’t been able to recapture its ranking of decades past as one of the most prestigious investment banks on Wall Street.
Dillon Read built its reputation as an exclusive financial adviser to wealthy individuals and blue chip corporations. Through the 1960’s and early 1970’s, it was a member of what was known on Wall Street as “special bracket” firms, along with Morgan Stanley & Co, First Boston Corp and Kuhn Loeb, which after several mergers is now part of Shearson Lehman Brothers Inc.
The strategies of Travelers and Dillon Read are “uniquely complementary,” Edward H Budd, chairman of Travelers; said in a joint statement with Messrs. Brady and Birkelund. “The Travelers investment asset base combined with the investment banking skills of Dillon Read represent an opportunity for both our companies to broaden services to clients and to contribute to profitability,” they said.
Dillon Read said it has annual revenue of more than $200 million and net income has grown at a 38% annual rate since 1982, but the firm wouldn’t break out profit figures.
Mr Brady said the Bechtel family maintained “an interest” in Dillon Read following the sale of its stake, but he declined to be more specific. “The Bechtel’s are satisfied with this transaction,” he said.
The firm’s owners include its managing directors, some employee shareholders and a Swedish bank, Skandinaviska Enskilda Banken, which owns 5% of Dillon Read.
Dillon Read Seeks to Return to Its Roots on Wall Street Now Ruled by Giants
The Wall Street Journal 13 November 1991
Dillon, Read & Co, which traces its history to pre-Civil War days, is trying to re-discover a quiet corner of Wall Street for the 1990’s.
For the past five years, the small investment banking firm had lived awkwardly under the umbrella of giant insurer Travelers Corp to which it sold out during the bigger-is-better 1980’s. But yesterday, as expected, Dillon Read’s management joined with British merchant bank Barings PLC to buy the firm from Travelers and make Dillon a private partnership again.
The question is whether the $122 million buy-out will enable Dillon Read to sustain itself as a small but relevant force on a Wall Street dominated by huge investment banks with global trading and investment banking operations.
Meanwhile, Barings, which traces its own lineage back to 1762, is trying to boost its stature world-wide, just as Dillon is. Despite its claim to be Britain’s oldest Merchant Bank, Barings only ranks as Britain’s seventh largest such institution.
Dillon Read executives “are very excited about prospects of controlling our destiny” again, John P Birkelund, the firm’s chairman, said in an interview. He said the sale was hatched in September when Andrew Tuckey, a Barings deputy chairman, invited him to London and pitched the idea of buying a stake.
Once a Wall Street powerhouse - (its predecessor helped build the nation’s first railroads and finance the Civil War) - Dillon Read in past decades has sunk to the status of a stodgy but respected investment banking boutique that has won mostly minor roles in major merger deals. It is perhaps best known for its famous alumni, among them Treasury Secretary Nicholas Brady, a former co-chairman.
In keeping with a reputation for secrecy, Barings only recently began publishing its financial accounts. In 1990, it reported pre-tax earnings of £42.4 million, down from a record £65.9 million in 1989. The 1990 figure represented an average 23% return on capital, which matches Dillon Read’s return on equity from 1986 to 1990. (Since the late 1970’s, Barings has been controlled by a charitable foundation).
While Dillon Read’s Mr Birkelund praised life under Travelers, he said the reasons that the two firms joined forces in 1986 are “no longer operative.”
Dillon, Read & Co Buys Back 20% Stake from Baring Holding
The Wall Street Journal, May 31, 1995
New York - Dillon, Read & Co has paid $30 million to buy back half of the 40% stake in Dillon Read that is owned by Baring Holding Co.
People close to Dillon Read said the firm will likely exercise an option to acquire the remaining shares in June 1997.
The price Dillon Read paid to acquire the stake represented roughly book value - assets minus liabilities - and is a 23% discount to what Barings PLC originally paid for the block, people familiar with the transaction said.
As a result of the buyback, Baring Holding, a newly created entity that is owned by Dutch financial giant, ING Group, now owns 25% of Dillon Read’s outstanding shares.
The future of the Baring stake in Dillon Read was thrown into question in February when Barings collapsed as a result of the actions of a rogue trader.
People close to Barings said that because of the extensive co-operation between the two firms on corporate-finance transactions, the deal was structured so that Baring could continue to have a stake in Dillon Read. Dillon Read has a strong corporate-finance presence in the US while Baring is dominant in Europe.
“Dillon Read highly values the working relationship that it has developed with Barings’ corporate finance team over the last three years,” said Dillon Read President and Chief Executive Officer Franklin W Hobbs in a statement yesterday. “We anticipate continued success for our joint corporate-finance activities, particularly in cross-border merger and acquisition business.”
Swiss Bank Unit to Buy Dillon Read
The Wall Street Journal, May 15, 1997
SBC Warburg to Pay About $600 Million
SBC Warburg ,the Swiss-British investment bank , is expected to announce as early as today an agreement to buy Wall Street’s Dillon, Read & Co for about $600 million, people familiar with the matter say.
The deal would create a cross-Atlantic marriage of two blue bloods of the investment-banking industry and mark the latest in a string of European investment banks acquiring access to the critical US investment-banking business.
It would also mark a setback for Dutch-British Investment Bank ING Barings , a unit of ING Group, which had been in discussions with Dillon Read over a possible acquisition as recently as Tuesday.
A spokeswoman in London for SBC Warburg, which is a unit of Swiss Bank Corp, declined to comment. A spokesman at Dillon Read also declined to comment.
But at Dillon Read’s midtown offices yesterday afternoon, Dillon executives told managing directors about the proposed take-over.
As part of the planned acquisition, Dillon Read Chairman John P Birkelund and President Franklin W Hobbs IV are expected to continue at the firm.
Directors
(NB) Evan G Galbraith - Chairman of Bankers Trust International between 1969 and 1975. Managing Director of Dillon Read & Co, London and New York City, 1975-81. US ambassador to France , 1981-85. Also, a member of the Council on Foreign Relations.
Clarence Douglas Dillon - Chairman of the Board, Director of Dillon, Read & Co Inc 1938-53, chairman of the board 1946-53, chairman & executive director 1971-81. Ambassador to France 1953-57,under-secretary of state for economic affairs State Dept 1958-59, under-secretary of state 1959-61, secretary of treasury 1961-65. Also chairman of the Rockefeller Foundation 1972-75 and of the Brookings Institution 1970-76.
John P Birkelund - President of Dillon, Read & Co Inc, NYC 1981-86, CEO 1986-93 and Chairman since 1986.
Franklin W Hobbs IV - CEO of Dillon, Read & Co Inc, NYC since 1993.
Nicholas F Brady - Former secretary of treasury 1988-93. With Dillon Read & Co 1954-82. Also director of ASA Ltd (see below) and Doubleday & Co (see interlocking boards document - file number 37).