Chase Manhattan Corp. has assembled a high-powered legal and investment banking team to defend against hostile takeover bids or a proxy fight, Wall Street sources say.
On the legal side, Chase has brought in Skadden, Arps, Slate, Meagher & Flom, and Sullivan & Cromwell, two of the top firms serving the banking industry.
Chase also has retained investment banks Goldman, Sachs & Co. and James D. Wolfensohn Inc., which is headed by former Federal Reserve chairman Paul Volcker. Goldman is said to be working closely with a seven-member Chase executive committee on defensive measures.
A Chase Manhattan spokesman said the bank has hired the same advisers in the past but would not discuss whether they have a current role. He reiterated the bank's denials that it was taking any action in response to the takeover talk that arose last month when opportunistic investor Michael Price disclosed a 6.1% stake.
But banking experts agree that takeover considerations are a high priority for Chase.
"They are not worried about just Price, but the whole shareholder base," said Lawrence Cohn, a banking analyst with PaineWebber Inc.
"Institutional investors are in business to maximize their rate of return, so if a potential buyer comes out of the woodwork and offers a decent premium to buy Chase, Chase shareholders will not vote it down," he added. Institutional ownership at Chase tops 65% of all shares.
Mr. Price, chairman and chief executive of Heine Securities, is known to have pitched the idea of a Chase takeover to a number of the industry's largest acquirers.
Officials of Chase, the nation's sixth-largest bank, have publicly shrugged off speculation about Mr. Price, and repeated that they want to remain independent.
Investment bankers following the situation said it is clear the bank is building its defenses. "When Chase brought in Rodgin, that signaled they meant business," said one banker, referring to Sullivan & Cromwell's well- known bank lawyer, H. Rodgin Cohen.
The bank also rejected earlier reports in American Banker and elsewhere that recent bylaw amendments and other actions were directed at Mr. Price.
Mr. Price gained renown in the banking industry for successfully toppling the management of Michigan National Corp. earlier this year when the midwestern regional bank was sold to National Australia Bank.
Last week the bank eliminated the rights of shareholders who controlled 25% of all shares to call a meeting, meaning the annual meeting will now be the only time investors can wage a proxy fight. The bank also lengthened the time frame that shareholders need to nominate directors and propose business matters.
Earlier this month the bank hired Tandon Associates to review cost cutting. Tandon has advised many of the industry's biggest names on their sharp cost-reduction programs.
Investment bankers said Chase has little choice but to take such actions, given its stock's poor performance in the past.
"I don't think Chase is overreacting. They have a serious problem," said an investment banker. "They have offered their owners a less-than-market rate of return.
"They are moving appropriately on two fronts," he added. "Defensively they are trying to lock up advisers they care about, and maybe some they don't care about but want to make sure they don't work for others. And offensively, they are doing all the things they should have done in the past."
None of the advisers would comment.
Mr. Cohen of Sullivan & Cromwell is well regarded within the banking industry and has been close to Chase CEO Thomas Labrecque.
Goldman Sachs partner J. Christopher Flowers is considered one of the top financial institutions investment bankers. Goldman also advised Irving Bank Corp. six years ago in its unsuccessful defense against Bank of New York Co.'s hostile acquisition.
Skadden Arps was brought in for its defense muscle, observers say, and probably advised Chase on its bylaw change. Skadden had to receive a waiver from Heine Securities to represent Chase, because the law firm also has done work for the Cherry Hills, N.J.-based mutual fund company.
Mr. Volcker worked for Chase roughly two decades ago as head of corporate planning.
The Chase spokesman said its seven-member executive committee meets frequently to discuss many issues. He said it was possible that Mr. Price was among them.
