But it was received like a dud--and just about no one aside from Chase CEO Bill Harrison and Morgan CEO Sandy Warner--was particularly excited. "It doesn't knock my socks off," says a Chase shareholder and former employee.

The market's reaction was even worse. Both stocks dropped in the week after the announcement, Chase by about 19% to about $46.56 in mid-September, and Morgan by 5% to $165.44.

With investors reacting that negatively to the deal, might the marriage be called off on the way to the altar?

Yet, in some ways there was a magnetic attraction between the blue-blood couple. After having made it abundantly clear that it wanted to acquire a big investment bank, and after having been spurned by the big boys--including Merrill Lynch and Goldman Sachs--Chase was under sever pressure to do some sort of deal. The pressure heated up following Credit Suisse's $11.5 billion acquisition of Donaldson, Lufkin & Jenrette, and UBS's $10 billion purchase of PaineWebber.

Those moves also put pressure on Morgan, which became the subject of takeover rumors that clearly put the company into play. Those rumors put Morgan into a difficult position. It felt its business was moving along nicely, with prospects excellent, but the takeover talk could have frightened off potentially big clients who wouldn't want their advisor on a big merger to suddenly be involved in a giant merger of its own.

Another worry: How many talented people would want to join a firm if they thought it might be bought out in the near future? Finally, with the prospect of an acquisition by a big European bank--most likely Deutsche Bank--looming, if Morgan had to sell out to someone, why not Chase?

Harrison also should feel comfortable with the Morgan deal. It's another large in-market merger, with which the "new" Chase has had good experience. And on a pro-forma basis, the deal catapults Chase up the league tables in capital-raising. Looking at all public equity and debt underwriting in the U.S. market this year so far, a combined Chase and Morgan would have been #3, behind Merrill Lynch and Salomon Smith Barney, according to figures provided by Thomson Financial Securities Data, an affiliate of this magazine. In equity underwriting alone, however, Chase would rise to Morgan's spot in sixth place, but even together they're well behind the front-runners.

So will the marriage work?

It remains unclear what the synergies will be. The banks expect pre-tax cost savings of approximately $1.5 billion and incremental net revenues of some $400 million. It is not clear, though, except for cost savings, that the combination will produce more revenues than each would have experienced individually.


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