In a few weeks, Firstar Corp. will complete its acquisition of U.S. Bancorp, bringing brothers Jerry and Jack Grundhofer together in business for a third time.
It was the deal that everyone was waiting for. Jerry's Milwaukee-based Firstar, with $74.5 billion of assets, agreed in October to acquire his older brother Jack's Minneapolis-based U.S. Bancorp, with assets of $84 billion. The combined banking company will be the nation's eighth largest.
Family control is rare at big U.S. banks these days. The best-known recent example was the McCoys of Bank One Corp., whose 60-year, three-generation reign ended in December 1999 when John B. McCoy resigned as chairman.
In contrast the Grundhofer brothers, who rose to be chairmen of two of the Midwest's largest banking companies, are first-generation bankers - the sons of a bartender and a maid.
The boys grew up in Southern California, where Jack, the elder, mentored Jerry in baseball. (Jerry is the better player, Jack said in a recent interview.) They joined the banking industry after college, in the early '60s; Jack got Jerry a job at Los Angeles' Union Bank and later at Wells Fargo in San Francisco.
They will bring different management styles to the combined U.S. Bancorp. Jerry has rewarded employees with vacations and bonuses for good performance - at the U.S. Bancorp Piper Jaffray financial services conference in New York in late November he told the crowd, "Outstanding customer service is what differentiates us from our competition." Jack, meanwhile, has earned a reputation for cost cutting.
But their mutual affection and respect are self-evident, and they said that will strengthen the merger.
Jerry, now 56, will be president and chief executive officer of the new U.S. Bancorp. Jack, 61, will be chairman until he retires at the end of 2002. "Whatever he wants me to do, I'll do," Jack said in the interview. "That's a change!" Jerry said.
"In the day-to-day operations, there's just no agenda," Jack said. "We know each other well, we have real direct communication, we can make decisions quickly."
The brothers will have offices down the hall from each other, and living in the same city (Jerry is moving his family to Minneapolis) will let them resume their regular golf game, they said.
The deal they engineered will combine Firstar's strengths in lending and deposit activities with U.S. Bancorp's investment banking capabilities, which are concentrated in its Piper Jaffray division. By mixing the business lines, specifically the fee-based businesses, the banks will reduce their vulnerability to credit cycles and interest rate changes. The fee-income ratio for the merged company will be 43.2%, between Firstar's 35.4% and U.S. Bancorp's 48%.
The two banks have a vast geographic range with very little overlap. Together, U.S. Bancorp and Firstar will have branches in 24 states throughout the West and Midwest.
As presidents of two large banking companies, the Grundhofer brothers typically traveled about four days a week to meet with customers and employees. Since their merger deal was announced, however, they have been touring the country together, hitting their banking offices in major markets to chat with senior management about the transition.
"Jack and I are a hell of a sales team," Jerry said. "If you get a prospect or customer in front of us, we can do some good things."
