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Credit Suisse creates investment behemoth

AXA to sell Gotham investment bank Donaldson, Lufkin

Investment bankers are usually the ones arranging other companies’ mergers, but two of Wall Street’s biggest players Tuesday were poised to combine their own firms in an $11 billion-plus transaction arising from continued consolidation in the financial sector.

Paris-based insurance group AXA was set to announce the sale of its New York investment bank, Donaldson, Lufkin & Jenrette, to the parent of Street rival Credit Suisse First Boston. Both investment firms have had extensive dealings with entertainment and media companies over the years, and their combination would continue a trend that’s already created financial powerhouses such as Morgan Stanley Dean Witter and Citigroup.

Three firms — Morgan Stanley, Goldman Sachs and Merrill Lynch –now control more than 50% of all underwriting and mergers and acquisitions business. But in M&A activity alone, a DLJ-CS First Boston combo would rank No. 3.

Another big firm, Lehman Bros., had reportedly also been interested in acquiring DLJ, but AXA and CS First Boston parent Credit Suisse Group of Zurich are expected to announce as early as this morning a deal in which DLJ shareholders would get about $90 a share. That would represent a 36% markup over Monday’s closing price, with takeover speculation sending DLJ shares higher Tuesday to close at $84.

Some shareholders would get cash, and others cash and Credit Suisse stock.

H’wood, Web dealings

Other banks have tended to lead the biggest deals involving underwriting syndicates for entertainment and media transactions, But DLJ and CS First Boston have been active participants as well.

Earlier this month, DLJ made a business acquisition of its own, buying the Advanstar trade shows company in a mostly cash deal valued at $900 million. Advanstar’s events include an annual trade show by the Video Software Dealers Assn.

DLJ is currently helping video retailer Hollywood Video look for strategic business partners, and this spring it participated in a financing for Netco Underground Online. And last year it led a $100 million insurance-backed securitization on behalf of fledgling producer Destination Films.

CS First Boston was among secondary underwriters on an initial public offering for homevideo giant Blockbuster last year and recently announced a partnership with Variety to stage “The Front Row” media and entertainment conferences in New York and elsewhere (Daily Variety, Aug. 21).

DLJ was founded as a research boutique in 1959 by Harvard classmates William Donaldson, Daniel Lufkin and Richard Jenrette. It went public in 1970, the first Wall Street firm to do so.

DLJ, which had revenue of $7.15 billion in 1999, employs about 8,150 people worldwide and is well-known for high-yield bond underwriting and trading.

Credit Suisse First Boston Group focuses on investment banking, underwriting and private equity transactions, without much brokerage staff. Company operates in 37 countries and has more than 15,000 employees. It had revenue of $9.8 billion last year.

(Dow Jones and Bloomberg News contributed to this report.)

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