Posted on 07/12/2002 7:12:43 PM PDT by HAL9000
NEW YORK -- FleetBoston Financial Corp. has decided to pull the plug on Robertson Stephens, its investment-banking division that in its heyday took some of the country's best-known dot-coms public.The decision comes after weeks of often-tense negotiations between Fleet and a management-led buyout team at Robertson. Despite an announcement in late June by the two sides that "an agreement to work together" had been reached, the pair failed to reach an deal.
"I am sad to announce that the deal won't move forward and that Fleet has decided to shut down the firm," Robertson Chief Executive John Conlin told the firm's staff Friday afternoon.
FleetBoston, the nation's seventh-largest bank, said the decision to sell Robertson was part of its strategy to focus more on the company's core banking businesses.
FleetBoston paid $800 million for Robertson Stephens in 1998, trying to capitalize on the technology boom by buying a well-placed investment bank that was taking companies public in droves. Now, it won't get a penny off its original investment. FleetBoston said in April it would look for a buyer for the division, but was unable to find one outside and couldn't strike a deal with employees.
"In recent weeks, Fleet and the Robertson Stephens management group were unable to structure an agreeement for an employee buyout of the firm," said Eugene McQuade, FleetBoston vice chairman and chief financial officer. "As a result, we have decided a wind down is in the best interestes of our shareholders."
And in his remarks to staff, Mr. Conlin was critical of Fleet's decision to sell, saying, "This is not a company that had to be shut down. It is a company whose owner decided to sell at a time when the investment-banking industry was confronting unprecedented challenges, immense economic uncertainty and the erosion of investor confidence. I can't think of a worse time to sell."
RBC Capital Markets analyst Gerard Cassidy said the decision ends a painful chapter in FleetBoston's history.
"When we look back on it, Robertson Stephens was in the sweet spot of the tech boom that encompassed the capital markets in the late 1990s," he noted. "When those markets collapsed, it brought Robertson Stephens down with it, and unfortunately the owner, FleetBoston, got caught holding Robertson Stephens."
The investment bank said Wednesday it was firing 425 of 950 workers to cut costs and pay for a possible buyout.
In April, FleetBoston announced it would scale back its Principal Investing venture-capital arm and discount brokerage Quick & Reilly, in addition to looking for a buyer for Robertson Stephens. Combined, the three units earned $ 700 million for FleetBoston in 2000, but lost nearly $800 million last year.
Last week, Boston -based FleetBoston, the parent company of Fleet Bank, said losses associated with goodwill stemming from Robertson Stephens would lower its earnings by $282 million for the second quarter.
Mr. Cassidy said that by being unable to sell the division, FleetBoston may now have to take a charge upward of $500 million.
"The silver lining for FleetBoston shareholders is that company will put this behind them, and the carrying costs that they've been lugging for the last 18 months will no longer be there," he noted. "The medicine has been very bitter for everybody: employees of Robertson Stephens, for management of Fleet, Fleet shareholders. It's been a very difficult time."
Clinton Repays Robertson
Issue Date: Feb 27 1998
Attracting big-name keynote speakers has become a game of one-upmanship for the investment banks that run technology-investing conferences, and this week BancAmerica Robertson Stephens trumped its rivals with the biggest name of all, President Clinton.
As word spread among the money managers assembled at San Francisco's Ritz Carlton that the President would appear, Robertson staffers couldn't help but crow. "Montgomery has never had a speaker as big as Clinton," one bragged. Crosstown rival Montgomery Securities, headed by Republican contributor Thom Weisel, has attracted big names like Larry Ellison, Bill Gates, and even retired general Colin Powell to its conference, but never a commander in chief. "They gotta be killing themselves over this at Montgomery," another staffer told a group of investors.
The scarcity of tickets had some attendees ready to do a little killing themselves. Some could be seen throwing fits when they found there weren't enough seats to go around. Another could be heard yelling into his cell phone, "I don't care what you have to do, just get me one of those damn tickets!"
On Thursday morning, after keeping the audience waiting for 50 minutes in a dim, overheated room, Clinton took the podium, cursed the darkness and asked for someone to turn up the lights. "I think there's something anomalous about the fact that this is a technology conference and all of you are in the dark," he said.
The President then, as expected, announced his support for the Internet Tax Freedom Act, which would ban for as long as five years local, state and federal taxes on e-commerce and the Net. (Net entrepreneurs love it, but local-government leaders hate it). Steering clear of the encryption issue - where he was most likely to clash with his audience - Clinton praised the technology leaders and investors in the audience for helping create the Net's freedom and diversity. "I believe that it would make the people who founded this nation very, very proud," he said.
The President had plenty more to be grateful for. His host, Sandy Robertson, CEO of Robertson Stephens and a longtime Clinton friend, donated $285,000 to Democratic-party causes during the 1996 campaigns, not to mention the millions he encouraged his Silicon Valley pals to donate. Thank you, indeed.
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