WHEN WALL Street digested the news last week that JP Morgan Chase was to buy Bank One of Chicago in a $58bn (pounds 32bn) deal, minds went first to the numbers. What was the match like? Where wouldthe synergies come? But there was something much more personal that excited them. The return of Jamie Dimon.
There is a personal tale involved that has almost Shakespearean overtones. It has to do with thwarted loyalty, jealousy and the casting into exile of a favoured son. Like all good dramas of clashing power and rivalry, this one is suddenly turning full circle. The defeated hero is coming home to conquer.
For years, Mr Dimon, 47, had been the protege of Sandy Weill and had been at his side during the milestone merger in 1998 between Mr Weill’s Travelers Group and Citibank. He was seen as the man who would eventually succeed Mr Weill atop that new banking empire, Citigroup. Until the day came just months later, however, when Mr Weill, no longer enamoured of his pushy young lieutenant, banished him.
Mr Dimon, who is known for blunt talking and a gloves-off approach to management, disappeared from the radar screen – to the dismay of Wall Street, which had always appreciated him. Then in 2000, he surprised many by abandoning New York entirely. He went to Chicago to head Bank One, at that time a deeply troubled institution struggling after years of financial difficulty, losing customers and money fast.
For all anyone knew, Chicago was where he would remain. He settled into his office inside Bank One’s downtown skyscraper and built a new home for himself, his wife, Judy, and three children in the prosperous Lincoln Park neighbourhood of the Windy City.
Thus, the quintessential New Yorker had resigned himself to becoming a Midwestern man. “I jumped in, I bought 2 million shares, bought a house, moved my kids here, joined a lot of organisations,” he said last week. And he set about meeting “thousands” of Bank One customers.
And by most accounts, what he has achieved at Bank One, with its now thriving credit card unit and wide retail presence, has only reinforced his reputation. He took the bank by the throat, slashing about 5,800 jobs from the workforce, or 7 per cent, and cutting annual expenses by $500 million. As he told analysts three years ago, “We didn’t just chop down a few trees, we took out a chain saw.”
Now, he is being paid off handsomely for his labour. The deal with JP Morgan values the shares of Bank One at $50.42, a considerable mark-up on the $28.38 Dimon paid for the 2 million he bought on joining. That means, by the way, that he has made a paper profit on his purchase of $44m. Never mind that his compensation last year totaled $6.3m.
But more than the money, it will be the prospect of returning to the real hub of American banking – New York City – that must be putting the smile on his face. There is more: the merger, assuming it is approved by the government, will put the new company within shouting distance of the old company he was booted from, Citigroup. And better still, the agreement envisages him taking over as its head in 2006.
In other words, the transaction means that he will get the chance of revenge and redemption. He will go face to face with the company that shed him six years ago and with Mr Weill himself, who remains the chairman of Citigroup even though he retired from his position as chief executive officer there last summer.
That is not to say that both protagonists will not be perfect gentleman. But gentlemen with hard noses. Mr Dimon confessed that Mr Weill had already telephoned to congratulate him on the deal. “I thanked him for all he taught me,” he noted, adding, all the same, that Mr Weill should be under no illusions that now their relationship will be different. They will be rivals, instead of partners. “If he doesn’t understand that, he will,” he told one journalist, albeit in a joking manner.
Mr Weill hired Mr Dimon straight out of Harvard Business School in the early 1980s as his personal assistant at American Express. Later, the two men worked together to build up Primerica through a series of acquisitions. That company became Travelers, which eventually merged with Citigroup in 1998.
Mr Dimon was immediately named president of the new colossus, but tensions between him and his mentor quickly came to the surface.
The last straw apparently came when Mr Dimon had a run-in with Weill’s daughter, Jessica Bibliowicz, refusing to promote her. The row led to Ms Bibliowicz leaving the bank. Mr Weill, according to accounts at the time, punished Mr Dimon by favouring Deryck Maughan, a former chief at Salomon Brothers. Mr Dimon was let go.
Not that Mr Dimon will have an instant free rein at the new JP Morgan. First, he will have to work alongside that bank’s incumbent chief executive officer, the 60-year-old Bill Harrison, before, in theory, succeeding him two years from now. They are not men with matching styles. “Jamie is a tough kid from New York, and Bill is a gentleman from the South,” said Michael Holland, chairman of Holland & Co, an investment firm in New York. Mr Harrison comes from North Carolina.
Dick Bove, a bank analyst at Hoeffer & Arnett, predicted: “There will be significant conflict. I see a smooth transition from a business standpoint, I do not see a smooth transition from a people standpoint.”
Moreover, Mr Dimon will have to work against a background of sky- high Wall Street expectations. “This is the pinnacle for him,” argued Timothy Ghriskey, president of Ghriskey Capital Management, a hedge fund that owns shares in Bank One. “I think he has to prove that all of this adulation from various sources is well deserved. I hope he can.”
Nancy Bush, an independent research analyst in New Jersey, said: “Whether this succeeds depends upon whether they let Jamie do what Jamie does, which is to restructure and cut costs.” For now, the two sides are promising $2.2bn in savings over three years, with as many as 10,000 workers likely to lose their jobs. This last piece of news had been met with understandable anguish, especially in Chicago.
And there is some unease within the Dimon family as well. Will Judy and the girls now have to uproot again and return the East Coast, leaving their schools and their new Lincoln Park home? “There has been a lot of crying in the household in the last two days,” Dimon confessed to reporters.
