Text of the Announcement

In a merger of equals that will create the nation's second-largest bank, Chemical Banking Corp. and Manufacturers Hanover Corp. Monday jointly announced a definitive agreement to merge in a stock-for-stock transaction.

The new institution will have $135 billion in assets; $7.7 billion in shareholders' equity; and major franchises in key regional, national, and global markets.

The merged organization will be called Chemical Banking Corp. and will be headquartered at 270 Park Ave., which is Manufacturers Hanover's present headquarters building.

John F. McGillicuddy, 60, Manufacturers Hanover's chairman of the board and chief executive officer, will be the new institution's chairman and chief executive officer.

Walter V. Shipley, 55, Chemical's chairman of the board and chief executive officer on Jan. 1, 1994.

Boards Approved on Sunday

The merger agreement was approved Sunday by the boards of directors of both institutions and signed by both chairmen this morning.

It provides for an all-stock pooling of interests, in which each share of Manufacturers Hanover common stock would be exchanged for 1.14 shares of Chemical common stock on a tax-free basis.

This ratio reflects the average closing common stock prices for the two companies over a recent period of 45 days. It is anticipated that the new Chemical Banking Corp. will have an initial dividend policy of 30 cents per common share, quarterly.

Following the merger, which is expected to be completed by yearend 1991, the new Chemical Bank will rank first in primary relationships with major U.S. corporations.

It will be a world leader in corporate finance, loan syndications, foreign exchange trading, interest rate and currency swaps, cash management, and securities processing.

The new Chemical will have the largest market share of consumers, small businesses and midsize companies in the highly competitive tristate region of New York, New Jersey, and Connecticut, with combined core deposits of approximately $56 billion.

Leadership in Several Fields

Chemical's Texas Commerce Bancshares is the leading corporate bank in Texas with a significant share, as well, of that state's consumer banking market. The new Chemical's credit card franchise will rank sixth in the nation, with some 7 million card holders nationwide and approximately $6 billion in outstandings.

With a network of nearly 660 domestic branches - including 436 in New York, 132 in New Jersey, and 92 in Texas - the new Chemical will be well positioned to capitalize on anticipated changes in the banking laws that will permit nationwide banking.

"Chemical and Manufacturers Hanover make a superb strategic fit - not only from the standpoint of the economies made possible by the combination, but also because the result will be a much stronger entity that can serve our customers with distinction and compete effectively with any financial institution in the world. That's good for New York and good for the United States," Mr. McGillicuddy said.

"The new Chemical will be much more capable of investing to keep our businesses on the cutting edge, whether in professional talent, technology, or new financial products," Mr. Shipley said. "Chemical and Manufacturers Hanover have remarkably similar cultures, and both have already made very substantial strides toward refocusing businesses and reducing expenses.

Tough Decisions Already Made

"There should be no doubt about our resolve to sustain this momentum, taking advantage of the new opportunities. An agreed blueprint for our common future already exists and many of the tough decisions have already been made," Mr. Shipley said.

By consolidating certain operations and eliminating redundant costs, the combined entity expects to cut operating costs by approximately $650 million per year when the consolidation is complete, in part by the reduction of about 6,200 from the 45,000 jobs currently in the combining entities.

It is presently anticipated that the new entity will take a restructuring charge of approximately $550 million to cover expenses related to these actions.

Effect on Credit Standing

After the merger, the new Chemical Banking Corp. plans to raise $1.25 billion in common stock, the successful completion of which is expected to have a beneficial effect on the credit standing of the institution.

After the anticipated restructuring charge and the planned equity offering, the new Chemical's Tier 1 risk-based capital ratio will be in excess of 6%, higher than the 4% required under the international regulations taking effect in 1992.

William B. Harrison Jr., 47, a Chemical vice chairman, will become a vice chairman of the new institution, with primary responsibility for corporate and institutional banking worldwide.

Edward D. Miller, 50, Manufacturers Hanover's vice chairman, will become a vice chairman of the combined institution, with primary responsibility for tristate regional banking, operating services, and nationwide retail operations.

Robert J. Callander, 60, Chemical's president, will be a vice chairman of the new entity, with responsibility for credit and risk management policies, until his retirement on June 30, 1992.

Management Team Choices

All the above executives will be on the board of directors of the new

Chemical Banking Corp. and the new Chemical Bank. In addition to these five management directors, the management committee will include:

* Marc J. Shapiro, 44, president and chief executive officer of Texas Commerce Bancshares Inc., who will continue in that position.

* Joseph G. Sponholz, 47, Chemical's chief financial officer, who will be implementation project manager for the merger.

* Peter J. Tobin, 47, now chief financial officer of Manufacturers Hanover, who will hold the same post in the new company.

* Michael Hegarty, 46, and William H. Turner, 51, who will be senior officers in tristate regional banking, and Edward A. O'Neal, 46, who will be a senior officer in operating services and nationwide retail operations; they will report to Mr. Miller.

Mr. Hegarty currently heads regional banking at Manufacturers Hanover, Mr. O'Neal is a Chemical vice chairman in charge of technologies and business services, and Mr. Turner is a Chemical vice chairman responsible for tristate regional banking.

* Donald H. Layton, 41, and Mark G. Solow, 43, currently co-heads of Manufacturers Hanover's global banking operation, who will be senior officers in corporate and institutional banking, reporting to Mr. Harrison.

Johnson to Resign

Thomas S. Johnson, 50, Manufacturers Hanover's president, has made known his decision to resign effective July 31, 1991, to pursue other career opportunities.

[In a separate press release, Mr. Johnson gave the following statement:

["The merger of these two organizations is a very exciting development that will result in the creation of one of the largest and most profitable banking companies in the United States.

["I have participated enthusiastically in the process leading to this merger. When I came to Manufacturers Hanover, however, it was with the prospect of succeeding to the CEO's position in a reasonable period of time.

["The merger makes that prospect much more remote, and I have decided to pursue other opportunities to play a leading role in a major financial company."]

A new board of directors will be established, with 29 members from the current Chemical and Manufacturers Hanover boards.

The merger is subject to approval by the shareholders of both institutions as well as federal and state regulatory authorities.

Stock Options

Chemical and Manufacturers Hanover have grante each other options to purchase up to 19.9% of the outstanding shares of each other's common stock if certain events occur, including a merger proposal or tender offer by a third party that would interfere with the transaction.

Goldman, Sachs & Co. is serving as financial adviser to Chemical on the merger and has rendered a fairness opinion to Chemical's board of directors with respect to the transaction.

Morgan Stanley & Co. is serving in the same capacity for Manufacturers Hanover and has rendered a separate fairness opinion to Manufacturers Hanover's board of directors.

All of Manufacturers Hanover's series of preferred stock will be exchanged for similar securities of the new institution, with the exception of the 9 7/8% mandatorily convertible preferred stock, which by its terms will not survive the merger.

Since Chemical Banking Corp. will be the surviving corporate entity, the merger will not affect the ultimate exchange ratio for Chemical class B common stock, which is expected to be 0.03 shares of Chemical common stock for each share of class B common stock.

PHOTO : John F. McGillicuddyn

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