Chase Manhattan Corp. confirmed that it has agreed to buy J.P. Morgan & Co. for $207 per share, or $33 billion in stock, a Chase spokesman said Tuesday evening.

The name of the new company would be J.P. Morgan Chase & Co.

Douglas A. Warner 3d would be non-executive chairman. William B. Harrison Jr. would be president and chief executive officer.

The announcement of the deal is scheduled to be made Wednesday morning at a meeting with analysts and shareholders.

Chase has long searched for a partner that, in the words of its former chairman Walter V. Shipley, would be a "transformational" deal that would catapult the company to a higher level of prominence. The company courted Merrill Lynch & Co. in recent years, but talks broke down over organizational issues.

Chase may have found its partner in J.P. Morgan & Co., a pairing that would tilt Chase's business mix decidedly toward wholesale banking and services for the affluent. Reports of talks between Chase and Morgan, first reported by The New York Times on its Web site Tuesday afternoon, sent Morgan's shares rocketing skyward. Rumors that Morgan was auctioning itself have been circulating on Wall Street for several days. They gained momentum over the weekend after the abrupt resignation of Peter Hancock, Morgan's chief financial officer, Friday. Mr. Warner also on Tuesday cancelled at the last minute a scheduled appearance at an investor conference sponsored by Merrill Lynch & Co., sending a lieutenant in his place.

The new executive committee would consist of Mr. Warner, Mr. Harrison, Geoffrey T. Boisi, David A. Coulter, Ramon de Oliveira, Walter A. Gubert, Thomas B. Ketchum, Donald H. Layton, James B. Lee, Jr., Marc J. Shapiro and Jeffrey C. Walker.

Mr. Gubert will become chairman of the J.P. Morgan investment bank; Messrs. Boisi and Layton will be co-CEOs of the investment bank and coordinate wholesale banking activities; Mr. Lee will head the investment bank's new business and work with the firm's most important clients; Mr. de Oliveira will head institutional asset management and wealth management; Mr. Coulter will continue to head the retail business and lead its Internet initiatives and Mr. Walker will continue to head the new firm's private equity group; Mr. Shapiro remains as head of finance, risk management and administration, and Mr. Ketchum will co-chair the merger transition team with Mr. Shapiro.

In addition to the announced management structure, Denis J. O'Leary and Nicolas S. Rohatyn will co-head the combination of and LabMorgan, and both would report to Mr. Coulter.

Also released on Chase's web site, Neal Garonzik, vice chairman of Chase, will leave the firm.

Chase has long put itself in a select cadre of "global" companies - Merrill, Morgan Stanley Dean Witter & Co., Goldman Sachs & Co. - but some outside observers would not give it equal credit. A "transformational" deal would quiet the critics.

But recently, under a new chief executive William B. Harrison Jr., Chase has been buying up much smaller asset management and investment banking firms, including Hambrecht & Quist in San Francisco, the Beacon Group in New York, and Robert Flemings Holdings in London. Those deals were not transformational, but they added new capabilities in the New Economy, high-profile Wall Street executives, and a stronger presence in Asia, respectively.

Morgan has one of the more powerful brand names on Wall Street. It is the modern successor to a bank that was founded in the 1800s, and under the leadership of its namesake, the company financed the rise of the railroad and steel industries. In recent years, Morgan has been shifting its emphasis from traditional banking activities like lending and pouring resources into building stock and bond underwriting and a mergers and acquisitions advisory.

A deal for Morgan would add significantly to Chase's asset management and private banking capabilities and strengthen its equity underwriting and advisory businesses, particularly in Europe. It would also focus Chase more towards customers on the affluent end of the scale, in contrast to the more mass-market approach embraced by competitors like Citigroup and Bank of America Corp.

A Chase-Morgan combination would also significantly tilt Chase's business mix toward services for corporations, the so-called wholesale banking relationships. Rivals like Citi tend to try and find a balance between corporate banking and consumer banking. Indeed, Citi just last week agreed to buy Irving, Tex.-based Associates First Capital Corp., a consumer finance company, for $31 billion in stock.

The companies have complementary strengths. Chase is strong in fixed income, loan syndication, foreign exchange trading, and, with the addition of Hambrecht & Quist, underwriting for tech start-ups. Morgan is strong in U.S. equity underwriting and derivatives, and in investment banking activities outside the United States.

"There are so many opportunities for synergies. JP Morgan made ultimate sense as kind of adding a touch of class, if you will, to the Chase Manhattan organization," said Andrew Collins, an analyst at ING Barings. "It's kind of like putting the cherry on the top."

Mr. Collins said the two would become the "10-ton gorilla" in the traditional wholesale banking business, as well as in foreign exchange and derivatives. JP Morgan's European footprint would help Chase "establish great inroads" in global mergers and acquisitions advisory - something Chase has emphasized heavily - and combined, the two would move "quite far up" into the top echelon of the fixed-income world, Mr. Collins said.

Despite its sterling image, Morgan has been under severe pressure expand on its own or find a merger partner that would give it access to more capital to invest in its businesses. The speculation has been particularly intense in recent weeks, since Donaldson Lufkin & Jenrette agreed in July to be sold to Credit Suisse Group.

Helen Stock contributed to this article.

  Chase Manhattan J.P. Morgan 
Headquarters New York New York
Total Assets ($ bil./June 30, 2000) $396 $266
Assets Under Management ($ bil.June 30, 2000) $250 $372
Market Capitalization ($ mil./Sept. 11) $71,043.17 $26,927.41
Current Price/Earnings Per Share 13.90 15.20
First Call Earnings Estimates (Q3 2000) 0.98 2.54
First Call Earnings Estimates (FY 2000) 4.00 11.54
No. of Employees 74,801 15,512
Source: Thomson Investors Network

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