The dealsters involved say this is all about business and strategy. Their pitch is that Morgan is merely competing with rivals Citigroup and Bank of America by buying a large commercial bank to even out the swings of its businesses, like trading and advising on mergers and underwriting stocks and bonds. But as with all deals, there’s ego here–not all of it Dimon’s. William Harrison Jr., who runs Morgan, was on the rocks a year ago, with the stock way down, the company enmeshed in the Enron scandal and employees demoralized by job cuts. Now, with his stock recovered, Harrison, 60, had a chance to buy an heir and a commercial bank and look like a winner.
He got Bank One for a cheap 14 percent premium above its predeal price–Bank of America paid 43 percent for Fleet–by agreeing to hand over control to Dimon in 2006 and giving Bank One directors half the seats on the New Morgan’s board. Dimon gets to be a hero to shareholders and employees by selling rather than merging, which boosted the stock and will allow employee stock options immediately.
For Dimon, it’s a return to New York to go head to head with Citigroup, the creation of his former mentor, Weill. Dimon, son of one of Weill’s old buddies, had been Weill’s second banana for 20 years, but Weill banished him shortly after Citigroup was formed. At the time, Weill’s people said Dimon, in the running to become CEO, was disruptive. Dimon’s people said Weill fired Dimon for having a high profile and not giving Weill’s daughter a promotion.
Ironically, while Dimon bristled under Weill’s my-way-or-the-highway school of management, Weill is now the one on the side of the road. He was eased out as Citi’s chief executive last year, in part for having his name attached to Wall Street scandals. Dimon, by contrast, is squeaky clean.
Now it’s Dimon’s chance to show what “my way” is. He was a hit at demoralized Bank One, which was reeling from a failed attempt to combine a big credit-card company with three big banks. Dimon shelled out $57 million personally to buy shares and fostered a stock-oriented culture.
Where does he go from here? Dimon’s talking about taking on Citigroup, and promised that unlike many bank mergers, this one wouldn’t screw up the customers. “We’ve been warmed up, we’re better at it,” he said. The new company, he added, would be cross-selling customers within a year, and would cut expenses. Cross-selling is known as “bundling” in biz-speak–and it may cost the unwary a bundle. Studies show that big, multistate banks typically charge higher fees than more localized outfits. But at the least we’ll get a few years of high drama out of this story. Will Jamie Dimon returning from exile be the wise, tempered boss to help Morgan mop up Citi? As story lines go, it’s money in the bank.
