Continuing efforts to expand its presence in wholesale transaction processing, Chase Manhattan Corp. has agreed to buy J.P. Morgan & Co.'s commercial paper issuing and payment services business.

Terms of last week's deal were not disclosed, but Chase stands to gain about 200 clients, vaulting it into the top tier in commercial paper servicing.

The sale is expected to close within three months, said a Morgan spokesman.

The business will be merged into Chase's existing commercial paper business, which is part of the bank's institutional trust unit.

Analysts said the deal fits a pattern Morgan has established as it leaves low-margin businesses for which large investments and sizable increases in volume would be required in order to remain competitive with other banks.

Morgan also announced that it would outsource certain cash and check processing services to Transys, the operational services subsidiary of Philadelphia-based CoreStates Financial Corp. Transys will now handle funds collections and disbursements and some electronic payments and data transfers, said a Morgan spokesman.

Another example of Morgan's strategy is its decision last month to sell its $800 billion-asset global securities custody business to Bank of New York Co., a deal estimated to be worth as much as $400 million.

Analysts said the sale would help Morgan invest in other areas, such as capital markets, where it has a bigger advantage.

"Morgan has been selling processing businesses because it's not interested in investing the money required to be competitive," said Diane Glossman, a banking analyst at Salomon Brothers Inc.

"Processing businesses are very volume-driven. The ability to be cost- effective is (affected) to a large degree by unit costs," Ms. Glossman added. "The sale (to Chase) is no surprise, given Morgan feels it doesn't have the processing scale."

Morgan's decision to exit certain processing businesses reflects a sharpening of the company's focus on core global banking activities, according to officials.

The bank will continue to sell money transfer services to commercial paper clients, since Morgan can leverage its existing system, said the spokesman.

According to Chase officials, the acquisition reinforces its position as a key participant in the commercial paper service industry and in the transaction services area, which includes custody, cash management, payments, trade, and trust transactions.

"This acquisition is a strategic and integrated fit into Chase's transaction and information business," said Stephen T. Iovino, senior vice president for the institutional trust business of the $120 billion-asset banking company. "We are very enthusiastic about providing value-added services to a broader client base while deepening our relationship with existing customers."

Mr. Iovino said objectives at the bank's transaction service businesses match its wholesale banking strategy of increasing client bases in fee- based businesses.

To that end, Chase has been adding portfolios to its transaction areas, including the acquisition last year of U.S. Trust Corp.'s international custody business, mutual fund processing, and investment trust business.

The deal with Morgan brings economies of scale and will let the bank increase its presence in the market, Mr. Iovino said.

The acquisition also gives Chase a significant number of new clients. Chase's daily outstanding issuances will go from $40 billion to more than $200 billion, said Mr. Iovino. Daily issuances will grow from $4 billion to $20 billion, he said.

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