The Travelers Group-Citicorp merger agreement proves that Sanford I. Weill, who has honed a reputation as the financial industry's consummate dealmaker, always has the next deal on his mind.
While attending a Business Council conference Feb. 25 in Washington, the chairman and chief executive officer of Travelers Group decided to visit the hotel room of his Citicorp counterpart, John S. Reed, and suggest they consider a merger.
Mr. Reed, who had generally disdained such talk, was a bit startled. "That wasn't what I thought you wanted to talk about," he said.
On Monday, that same element of surprise sent shock waves through an entire industry.
The chance to create the world's largest financial services conglomerate was too good for these two leaders to pass up. The deal they crafted will put their past accomplishments, contrasting personalities, and long-term visions under an unusually bright spotlight, probably for years to come.
In one of their strongest signals about how the new Citigroup will take shape, Mr. Reed, 59, and Mr. Weill, 64, said they will work side by side as co-chairmen and co-chief executive officers.
But as they and their companies set forth the logic behind the record $70 billion combination, they also set tongues wagging about the improbability of it all-or at least the failure of much of the financial services world to anticipate this particular pairing.
Over the past weekend, as the leaders of the nation's largest banking companies gathered in Phoenix for the annual meeting of the Bankers Roundtable, Mr. Reed, who usually attends, was conspicuously absent. Others wondered what he might have up his sleeve, but any speculation about a merger was tongue-in-cheek and off-base.
"I would never have imagined it," said Lawrence Fish, chairman, president and chief executive officer of Citizens Financial Group, Providence, R.I., who was at the Bankers Roundtable meeting. Mr. Reed "is a tremendously strategic and creative thinker and it doesn't surprise me at all that something this mind-boggling would appeal to him."
In the end, the size and unforeseen nature of the agreement fit Mr. Reed's reputation for aloofness, unpredictability, and an ability to trump all expectations.
Once he showed his receptivity to Mr. Weill's approach, said one source, it became clear to both how their outlooks meshed.
The source suggested that they each found a "soul mate" and that Mr. Reed could end up running the enterprise while Mr. Weill works on the next great strategic strokes.
The two appeared at their press conference Monday wearing matching ties bearing Travelers Group's umbrella logo. They both spoke of the unprecedented task they are undertaking and expressed confidence they can work together.
"I know all about sharing challenges and responsibilities-I've been married for 43 years," said Mr. Weill, whose wife, Joan, was in the audience.
For his part, the more cerebral and understated Mr. Reed acknowledged that "two people sharing a job is inherently difficult. I'm sure everyone will be measuring our office space now" to see which one has the bigger location.
"They may say they will be co-CEOs, but one man has to sit on the higher platform," said Martin Mayer, a fellow at the Brookings Institute and author of several books on banking and finance.
Citicorp, Mr. Mayer said, is a technology and electronic-payments pioneer that has reached for economies of scale around the globe. He described Mr. Reed, chairman since 1984, as "good at recognizing mistakes and sacrificing talent when he sees things are not working."
While Mr. Weill avidly pursued acquisitions-at one time he made a play for BankAmerica Corp.-Mr. Reed steered Citicorp in other directions. It acquired some thrifts, securities firms, and Quotron, a business data service, in the 1980s, but nothing since. It held some inconclusive talks with American Express Co. a year ago.
Mr. Weill made headlines and magazine covers last year when Travelers Group said it would acquire Salomon Brothers for $9 billion. He has been a fixture in the financial press since the early 1980s when he headed Shearson Lehman Brothers, brought it into American Express Co., and then left after a power struggle to build Travelers.
"Sandy has the ability to get the best people to work for him," said Mr. Mayer.
He and Mr. Reed will need big doses of diplomacy to make this merger succeed.
John G. Duffy, director of corporate finance at Keefe, Bruyette & Woods Inc., said there is only one example of a Wall Street firm or banking company being successfully headed by two men-Goldman, Sachs & Co., a private investment banking partnership.
But he added that the two cases do not make "a good analogy."
"I don't think it's different in direction" from the recent trend in financial service combinations, said H. Rodgin Cohen, the prominent banking lawyer with the New York firm Sullivan & Cromwell. "It's just an exponential increase in the pace and size."