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CALIFORNIA / News and Insight on Business in the
Golden State

U.S. Bancorp Agrees to Acquire Libra

Financial services: The deal for the L.A.-based investment bank follows a trend of consolidation.

September 04, 1998|DEBORA VRANA | TIMES STAFF WRITER

U.S. Bancorp of Minneapolis said Thursday it has agreed to buy Los Angeles-based Libra Investments Inc., a privately held investment bank, in a move that would significantly boost its presence in California and increase its investment banking and junk bond business.

The deal comes just months after rumors that U.S. Bancorp was considering a purchase of Wells Fargo & Co., which later agreed to be bought by U.S. Bancorp's cross-town rival, Norwest Corp. Earlier this year, U.S. Bancorp purchased investment bank Piper Jaffray Cos. for $730 million.

The deals are all part of the rapid consolidation in the financial services industry in recent years, as banks form strategic alliances in an increasingly competitive environment. Banks have moved quickly to expand into investment banking--more lucrative than personal banking, now that regulations are easing.

"Libra has the people with the unique underwriting and trading skills, as well as the extensive credit and market knowledge that has resulted in their outstanding success in this specialty area," said John F. Grundhofer, president and chief executive of U.S. Bancorp.

The acquisition might signal a shake-up in the increasingly competitive Los Angeles investment banking community, because Libra would have the capital base to finance much larger deals as a subsidiary of U.S. Bancorp, which has $74 billion in assets.

Once the deal is closed, Libra would change its name to U.S. Bancorp Libra and operate as a separate division. The purchase price was not disclosed.

Formed seven years ago by several former traders from the now-defunct 1980s investment banking powerhouse Drexel Burnham Lambert, Libra is a boutique firm specializing in corporate finance and advisory services, securities research, and sales and trading of junk bonds. It has worked on deals for companies such as Cherokee Inc., the Van Nuys licenser of clothing, as well as Bally's Grand hotel-casino in Las Vegas.

"It certainly fills in their overall stable of services to offer clients," said Charlotte Chamberlain, bank analyst at Jefferies & Co. in Los Angeles. "It makes a whole lot of sense for U.S. Bancorp, which serves middle-market companies, to be able to fully service those clients not only with commercial banking but with the ability to raise debt and equity."

Libra, with 65 employees, also manages private equity and mezzanine investment funds and participated last year in 49 deals worth about $5.8 billion. It plans to open another 30-person office in Minneapolis after the purchase closes later this year, said Jess Ravich, Libra's chairman and a former banker at Drexel Burnham Lambert.

"This is a perfect fit," said Ravich, 37, who would continue to serve as chairman and co-chief executive after the deal is completed. Jeffrey D. Benjamin, who joined Libra earlier this year from Union Bank of Switzerland in New York, where he was in charge of high-yield business, is the firm's co-CEO.

Because of the different cultures at banks and investment banks, other high-profile acquisitions have run into snags. Most recently, there have been reports of conflict at NationsBanc Montgomery Securities, which was bought by NationsBank last year, leading to speculation that company founder Tom Weisel would resign.

Ravich said he didn't think that would be a problem in this acquisition.

"The key thing here is not just the capital--we could get that somewhere else. It's the people that I really felt comfortable with," Ravich said.

The deal is subject to regulatory approval and is expected to close by year's end.

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