European Banks Seen Likely to Bid for Robertson

Deep-pocketed European bank groups are among the most likely buyers of BankAmerica Corp.'s Robertson Stephens & Co., people close to the company say.

On Tuesday, executives at Robertson Stephens confirmed that they had asked San Francisco-based BankAmerica to put the investment bank up for sale. The move came in the wake of BankAmerica's plan to merge with Charlotte, N.C.-based NationsBank Corp., which owns Montgomery Securities, an archrival of Robertson Stephens that competes in many of the same businesses.

Sources close to the deal named European banks, including ING Group, Dresdner Bank, Commerzbank, and ABN Amro as likely suitors for Robertson Stephens.

All of these banks tried to buy Montgomery Securities last year before that firm sold itself to NationsBank for $1.2 billion, a source close to Montgomery said.

Meanwhile, insiders dismissed reports that discount broker Charles Schwab & Co. would buy Robertson Stephens.

San Francisco-based Schwab recently showed interest in another investment bank, Hambrecht & Quist. But Schwab caters to do-it-yourself retail investors who would not be likely buyers of the initial public offerings for which Robertson Stephens is known, observers said.

In a conference call with reporters yesterday afternoon, Michael McCaffrey, chief executive and president of BancAmerica Robertson Stephens, said the firm had already been approached by several interested buyers.

He added that he had no preference as to what type of company bought the firm - as long as it had deep pockets and was committed to Robertson Stephens' core businesses.

"Working with BofA has been a positive experience," he said. "We're also going to talk to different kinds of organizations."

"We've embarked on a strategy that requires a large parent." he later added."But merging with a large bank is only one way of doing that."

Robertson Stephens has seen its staff grow by 25% since it was purchased by BankAmerica for $540 million in October. The bank supplied an infusion of capital to fund the expansion.

On Tuesday, Robertson Stephens employees expressed relief at finally knowing what to expect, after a week of pondering the potential bloodbath that could result if the merging bank holding companies had held on to both securities firms.

"It's been made very clear to people at BankAmerica that they are the ones being acquired, and the decisions will come out of Charlotte," one executive recruiter said.

Added one insider: "There's been a lot of gnashing of teeth at Robertson Stephens since the merger was announced."

Robertson Stephens had meetings with Montgomery in the last week regarding the integration of their two firms, official said. While BankAmerica urged its securities firm to try to make the marriage to Montgomery work, it soon became clear that many Robertson Stephens bankers would lose their jobs.

But whoever purchases Robertson Stephens may also see the firm's assets walk out the door, observers say. Robertson Stephens' bankers who have retainers with BankAmerica would be free to leave. The second change of control in six months would also enable the firm's partners to take their money and depart.

"Every time you go through a change of course there are people who start to look for alternatives, but I think this announcement today has been cheered," Mr. McCaffrey said.

Meanwhile, market observers praised BankAmerica's decision to sell the securities subsidiary. BankAmerica lost money on Robertson Stephens in the two full quarters since buying the investment bank: about $40 million in the fourth quarter and between $25 to $30 million in the first quarter, bank executives have told analysts.

Some analysts described BankAmerica's accounting methods as "conservative," saying they front-loaded a lot of expenses that arguably could have been capitalized.

And most observers agree the integration of the securities firm into the bank has been rocky. For one thing, executives at BancAmerica Robertson Stephens can point to fewer cross-sells between the bank and the securities arm than NationsBank and Montgomery can.

Montgomery, which, like Robertson Stephens focuses on technology new issues, also covers a much broader array of sectors than its rival. It has also fared better in its integration with NationsBank, observers say.

Robertson Stephens' investment management arm is still exploring its options with BankAmerica, Mr. McCaffrey said. Goldman, Sachs & Co. is advising the bank on the sale of the securities firm; Robertson Stephens, meanwhile, has retained Lazard Freres & Co.

Aaron Elstein contributed to this report.

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