Deal Creates Biggest Bank Firm -- Chemical, Chase Manhattan Announce $10 Billion Merger

NEW YORK - Chemical Banking Corp. and Chase Manhattan Corp. agreed to merge in a $10 billion stock transaction that will create the biggest banking company in the United States, the banks said today.

The combined company, to be called Chase Manhattan Corp., will have $297 billion in assets, outranking Citicorp, now the largest U.S. bank company with $257 billion in assets.

The blockbuster merger, rumored to be in the making since last month, comes amid a wave of large bank deals, as financial institutions combine forces to expand revenues and garner more customers. A $2.1 billion merger between Cleveland, Ohio-based National City Corp. and Pittsburgh-based Integra Financial Corp. also was announced today.

Chase and Chemical are both based in New York. Locally, Chase has mortgage offices in Bellevue, Federal Way, Port Orchard and Puyallup, and a personal-financial-services office in Bellevue. It also has credit-card customers in Washington state.

The rapid pace of takeovers in the industry helped push Chase and Chemical together, Thomas Labrecque, Chase's chairman and chief executive said at a news conference this morning.

This is Chemical's second big merger. In 1991 the New York bank combined with Manufacturers Hanover Trust Co. in a deal that led to 6,000 layoffs and more than 80 branch closings.

The Chemical-Chase merger, expected to be completed by March 1996, will result in 12,000 job cuts from a combined staff of 75,665

in 39 states and 51 countries.

This time Chemical will give up its name. Chase, with its long association with the Rockefeller family and its vast global operations, has more name recognition and a greater cachet with clients, especially in overseas markets.

With the outlook for revenue growth cloudy at both Chemical and Chase, the merger makes sense and brightens prospects for both institutions, said Charles Vincent, a bank analyst at PNC Securities Corp. in Pittsburgh.

"Banks are under severe pricing and competitive pressures; that's the driving force behind all the mergers," said Vincent.

A wave of big mergers has swept the industry in recent months as companies pair up to be more competitive. The largest previous deal in the wave of recent bank mergers, a $5.4 billion combination of First Union Corp. and First Fidelity Bancorp, was announced in July.

Chase and Chemical are in many of the same businesses - mortgages, credit cards, small business lending, securities trading, corporate banking and international banking. Operations will be merged and staff will be cut to achieve $1.5 billion in annual cost savings, the banks said.

The merger is subject to regulatory and shareholder approvals.

The combined entity will also have huge national and global banking businesses.

The new Chase will have 25 million customers across the nation and rank third in mortgage lending and fourth in credit cards. The bank will also be a global leader in several corporate banking businesses, including securities trading and safekeeping, corporate loan syndications and funds transfers.

The boards of directors of both companies approved the merger agreement yesterday. Under the agreement, 1.04 shares of Chemical stock will be exchanged for each of Chase's shares, making the deal worth about $10 billion.

Both banks' stocks rose sharply today on the New York Stock Exchange. Chemical's shares were up $5.50, or 10 percent, to $59.87 1/2 near the close of trading and Chase was up nearly 13 percent, or $6.75 a share, at $59.62 1/2.

Walter Shipley, 59, chairman and chief executive officer at Chemical, will be chairman and chief executive at the combined company. Labrecque, 56, will become president and chief operating office of the new bank.

Chase, the nation's sixth largest bank with $118.7 billion in assets, has been the subject of takeover rumors since April, when New Jersey investor Michael Price took a 6 percent stake in the company and encouraged management to take steps to boost bank's stock.

Chase denied it was for sale, but initiated a massive cost-cutting drive and adopted anti-takeover measures.

Chemical, the fourth largest U. S. bank with $178.5 billion in assets, has proved that mergers within the same region can work, having made a success of its 1991 merger with Manufacturers Hanover Trust.