|
|
Get Four
|  | JANUARY 27, 2004
By Amey Stone Jamie vs. Sandy: An Epic Grudge Match Jamie Dimon's goal to make JP Morgan-Bank One tops in banking means taking on former mentor Sandy Weill at Citigroup Great human dramas often play out on a corporate stage. With the announcement of the $58 billion merger of JP Morgan Chase (JPM ) and Chicago-based Bank One (ONE ), the curtain is rising on a new act in what's proving to be an epic tale of a corporate king and his young protégé. This is the story of Jamie Dimon, chief executive of Bank One and now the heir apparent to JP Morgan, which will be No. 2 in assets in the world with $1.1 trillion once the banks merge. It's also the story of Sandy Weill, the chairman of Citigroup (C ) and Dimon's longtime mentor -- until Weill summarily ejected him from the company in 1998. Citigroup, with $1.2 trillion in assets, is No. 1, which will pit Dimon against his former boss and colleagues in his quest to make JP Morgan the world's biggest financial-services firm. Dimon's and Weill's tumultuous relationship is more than just good gossip. The competition between the two banking titans could have implications that investors might want to consider. "In a lot of ways their relationship has an oedipal arc to it," observes Peter Cohan, a former banking executive, now a management consultant and author of Value Leadership. FATHER AND SON. The Weill-Dimon team was legendary for how intensely they worked together and how many megadeals they struck. It was a far cry from the typical employer/employee pairing. In 1983, Weill, then at American Express (AXP ), hired a young, eager Dimon (whose stockbroker father had worked for Weill) when he was just 26 and fresh out of Harvard Business School. Weill left American Express in a huff not two years later, and Dimon followed his mentor. The two of them worked side-by-side culling deal opportunities until they alighted on a foundering consumer lender in Baltimore called Commercial Credit, took it public, and used it as a base with which to build Citigroup. The string of successful mergers culminated in 1998 when Weill's Travelers, the former insurance giant, merged with Citibank. As Weill's detail man, Dimon took care of the day-to-day minutiae of many a merger. And to many observers, their relationship seemed like that of father and son.
OFF TO CHICAGO. In another dramatic altercation, known in Wall Street lore as the "Greenbriar incident," at a corporate retreat in front of a crowded dance floor, Dimon nearly got into a shoving match with Deryck Maughan, now vice-chairman of Citigroup and head of its international division. The story goes that Dimon accused Maughan of snubbing a colleague's wife on the dance floor, but neither party has ever confirmed the particulars. Still, that incident has been blamed for leading Weill, with some nudging from his then co-CEO John Reed (now interim chairman of the New York Stock Exchange), to ask Dimon to step down in 1998. Dimon's surprise departure was mourned by shareholders, who pushed Citigroup's stock down 5% the day it was announced, as well as by employees at Salomon Smith Barney, many of whom gave Dimon a standing ovation on the trading floor his last day. The former heir apparent of Citigroup took his number-crunching skills to Chicago, where he was hired to turn around Bank One. Dimon's ejection more than five years ago is likely to make him extra-tenacious in his effort to best Citigroup. "Jamie is an extremely competitive person who wants to show he can come back to New York and be on top," says Cohan. "BANKING STEAMROLLER." By Wall Street standards, Dimon has two measures for achieving that goal. The easier would be to expand JP Morgan's assets. With just $100 billion to go to match Citigroup, that could be accomplished with just one more big deal. The real test, however, will be if Dimon can get JP Morgan's market value higher than Citi's. As of the merger announcement, JP Morgan and Bank One had a combined market cap of $130 billion, just half that of Citigroup's. With analysts and investors applauding the merger, surpassing Citigroup's market cap may eventually be in reach. Given JP Morgan's dominance in corporate and investment banking and Bank One's strong consumer-banking businesses, "put those two companies together, and you get an entity with potential to be a banking steamroller," wrote Thomas Brown, a former banking analyst and now a hedge-fund manager, in a Jan. 15 analysis on his Web site Bankstocks.com. Tom Taulli, author of The Complete M&A Handbook, describes Dimon as "ultra-competitive, very smart" and says he "learned from the master." At the press conference announcing the merger, Dimon seemed giddy. In questioning from reporters, he was all too ready to joke about taking on his former employer, Citigroup (see BW Online, 1/15/04, "A Made-to-Order Megamerger"). Dimon was unavailable for an interview for this story, but Bank One spokesman Thomas Kelly says Dimon and Weill "mended fences years ago" and adds that Weill was one of the first people to call Dimon and congratulate him once the deal was announced. "CHAIRMAN EMERITUS"? Weill, soon to be 71, may actually wish his former protégé well. After all, by many accounts, the never-lost-a-battle Weill is entering the twilight of his career. And his reputation, experts say, has been tarnished by his ties to a widespread investigation of conflicts of interest at Wall Street firms in recent years. Although he wasn't accused of any crimes, Weill admitted that he had asked high-profile telecom analyst Jack Grubman to take a "fresh look" at AT&T (T ), a client of the investment bank. Also, Weill is increasingly removed from day-to-day operations at Citigroup and is set to retire from his role as chairman in 2006 -- the same year Dimon is slated to take over as CEO at JP Morgan from Bill Harrison. The timing means the two men likely won't be going head-to-head as much as if Weill were still running the ship. "Sandy Weill is chairman, almost chairman emeritus of Citigroup," says Richard Bove, an analyst with San Francisco investment bank Hoeffer & Arnett. According to Bove, Weill's goals are to help Citigroup get further entrenched in emerging markets such as China, India, and Russia. He and Dimon "will not be coming into conflict with each other in any way, shape, or form," Bove says. Dimon, who has a tough task ahead of him in taking on Citigroup, must first make it to the CEO's desk before he can take on Weill. Even though Bank One's deal with JP Morgan calls for him to take over as chief executive, that move is hardly set in stone. "I don't think he's ever going to be the CEO of JP Morgan," says Bove. CONSUMERS WIN. That issue aside, no one is arguing that executives at this level let personal grudges take precedence over sound financial decision making. Still, a few former rivals at Citigroup would likely love to prove that getting rid of Dimon back in 1998 was a good move and that they're the true heirs to Weill's legacy. Chuck Prince, Weill's legal right hand going back to Commercial Credit, is now CEO. Citigroup did not make executives available for comment for this story. This fierce personal competition will likely fuel the rivalry between the banking powerhouses. And as the Shakespearean-like saga continues, investors and consumers could benefit from a push by both banks to be the best in the industry.  Stone is senior writer for BusinessWeek Online in New York and co-author with Mike Brewster of King of Capital: Sandy Weill and the Making of Citigroup Edited by Beth Belton
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
