Travelers Group will buy Salomon Inc. in a deal valued at over $9 billion that will bring together two of Wall Street's most powerful investment firms.
The deal is the latest in a wave of buyouts rearranging the financial services landscape as brokers, banks, insurers and other asset managers are combining forces to compete more effectively.Travelers said Wednesday that it will merge Salomon with its Smith Barney Holdings Inc. brokerage division to create Salomon Smith Barney.
Under the deal, Travelers will issue 1.13 shares of its stock for each share of Salomon stock for a total value of over $9 billion. The deal is worth $81.43 per share for Salomon stockholders, well above Tuesday's $71.50 closing price.
James Dimon, chairman and CEO of Smith Barney, and Deryck C. Maughan, chairman and CEO of its Salomon Brothers investment arm, will serve as co-chief executives of the new Salomon Smith Barney investment division.
Sanford I. Weill, Travelers' chairman and chief executive, said the deal will substantially strengthen Travelers Group's earnings and capital base. Salomon Smith Barney will be in the top tier of global securities and investment banking firms, he said.
The announcement of Wednesday's deal follows speculation last Friday that Travelers was preparing to make a bid for Bankers Trust New York Corp., one of the nation's biggest banks.
The deal comes as Salomon tries revive its reputation as an investment powerhouse after a Treasury bond bid-rigging scandal in 1991 tarnished its image on Wall Street.
Legendary investor Warren Buffett, whose Berkshire Hathaway investment company owns 19 percent of Salomon, named Maughan to run the brokerage after the Treasury scandal.