U.S. Bancorp to buy Piper for $730 million Big bank gains entry to investing, brokerage field

Banking

December 16, 1997|By BLOOMBERG NEWS

MINNEAPOLIS -- U.S. Bancorp, one of the nation's biggest banks, yesterday agreed to buy the century-old investment banking and brokerage concern Piper Jaffray Cos. Inc. for $730 million in cash.

The transaction values Piper, a brokerage firm, at $37.25 a share. That is about four times book value -- assets minus liabilities -- a bigger premium than other banks paid this year to buy securities firms. Piper shares rose $6.625, or 22 percent, to $36.375 yesterday while U.S. Bancorp's stock rose $1.75 to to $115.

The new combination would allow U.S. Bancorp to offer investment banking and brokerage services through a new subsidiary, which it will call U.S. Bancorp Piper Jaffray Inc.

Both companies are based in Minneapolis.

"The price that U.S. Bancorp is paying seems higher than usual," said Amy Laguardia, senior vice president at Gray, Seifert & Co., which owned almost 303,000 U.S. Bancorp share as of Sept. 30.

The acquisition comes as Depression-era walls that banned banks from investment banking and other securities businesses continue to erode.

The agreement also takes place two months after Piper settled a class-action lawsuit related to allegations that it misrepresented the risks of some bond mutual funds.

U.S. Bancorp, the 15th-biggest U.S. bank with branches in 17 states stretching from Minnesota to Washington, is a leading commercial bank for companies with more than $10 million in sales.

Piper specializes in providing investment advice to individuals, as well as offering equity and fixed-income underwriting.

Officials at U.S. Bancorp said the price it is paying for Piper is consistent with what other banks have paid for brokerage firms, and adds about $13 billion of assets that the bank will move to its money management unit.

"If you calculate what funds are going for these days, this is a little different situation than buying a retail brokerage house," said Richard Zona, vice chairman at U.S. Bancorp.

This year, BankAmerica Corp. bought Robertson, Stephens & Co. for 3.7 times book value and First Union Corp. bought Wheat First Butcher Singer for about 3.1 times book value.

Pub Date: 12/16/97

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