After taking long and tangled paths to the tops of their respective banking companies, often helping each others career along the way, John Jack Grundhofer and younger brother Jerry Grundhofer struck what may be the ultimate friendly deal.
Certainly the two were not shy on Wednesday about drawing attention to their relationship. During a conference call to discuss the deal between Firstar Corp. and U.S. Bancorp, Jack introduced Jerry as my mothers favorite son and dropped in a note that their mother was overjoyed at the prospect of Jerrys move to Minnesota.
Their kinship is being viewed as an asset on Wall Street, where analysts expect the two might actually work their way to a functional power-sharing arrangement, with Jack, 61, taking the chairmans post and Jerry, 56, the chief executives slot. In an interview, each said he had worked well with the other before and that they felt mutual respect and trust, in the words of Jerry.
These two guys know each other so well they can literally get a head start on the integration process. The fact that they can communicate is a major plus, said Anthony Polini, a bank analyst at Advest Inc. Much of the work can be done before the merger closes in March 2001.
At that point, the helping hands Jack often extended to Jerry will have come full circle. They were born in Southern California to a bartender and his housemaid wife, and older brother John usually was the one sticking up for his sibling.
In the 1960s, John got Jerry his first job, in the mailroom at Union Bank in Los Angeles, where John was a management trainee. Fifteen years later, when Jerry was president of the foundering Alliance Bank, John got his own employer, Wells Fargo & Co., to hire Jerry.
Jerry eventually became head of retail at San Francisco-based Wells. John, who joined the U.S. Bancorp predecessor First Bank System in 1990, spent most of his career on the wholesale side. And that is another reason that many think the merger of U.S. Bancorp and Firstar will work out well.
The two brothers are fundamentally oriented differently one toward the consumer, the other toward the institution, said Michael McKeon, managing partner of the U.S. banking and capital markets business at McLean, Va.-based consulting firm Booz Allen & Hamilton. That should help the deal.
It was at Minneapolis-based First Bank that Jack won his nasty sobriquet as the ripper. In his first two years at the company John cut 2,000 workers, or 20% of the payroll. But the strategy ran aground after the $9 billion purchase of U.S. Bancorp. A rushed integration led to a hemorrhaging of employees and customers. Revenue growth was sluggish.
Meanwhile, younger brother Jerry was using a completely different strategy at Firstar. Instead of ramming through cost cuts, he promoted a gung-ho sales culture and rewarded employees with stock options and trips to Las Vegas.
Analysts are counting on Jerrys approach to be dominant, at least in terms of retail strategy. They both acknowledge that the Firstar business model works. The retail side at U.S. Bancorp was not turning around as quickly as they wanted it to, and that was a third of the company, said Thomas McCandless of CIBC World Markets.
It is unlikely that any heavy job cuts will result from the combination, though that stems more from the limited geographical overlap between the companies than from their style. Says Advests Mr. Polini: We think job cuts will probably be less than 5% of the combined staffs.
