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Robertson Stephens on Auction Block

Banking: FleetBoston looks to sell the San Francisco investment firm, which was dragged down by the tech bust.


FleetBoston Financial Corp. said Tuesday that it will sell Robertson Stephens Inc., a boutique San Francisco investment bank that helped lead the boom in technology companies and has been dragged deep into unprofitability by the sector's subsequent bust.

Robbie, as it is known, was lead underwriter for a host of 1990s tech public offerings, with a sideline in youth-oriented retailers such as BeBe Stores Inc. and Charlotte Russe Holdings Inc.

A few offerings were winners, like Inc., but the typical Robertson IPO has lost 45.6% from the offering price since BankBoston Corp., a FleetBoston predecessor, acquired the firm in September 1998, data from Thomson Financial show.

Chad Gifford, who became FleetBoston's chief executive in January, said Robertson Stephens' niche is just too narrow to be of much benefit to FleetBoston in the coming years.

"It is increasingly clear that advantage in the future will accrue to the large, diversified investment banking firms," Gifford told shareholders Tuesday at the bank's annual meeting.

The Robertson Stephens acquisition was part of a 1990s diversification spree by big U.S. banks, which now seem to be retrenching. For example, Citigroup Inc. recently sold a major stake in its Travelers insurance subsidiary, and Bank of America Corp. last year shut down its auto-loan and sub-prime lending businesses, saying they were too unpredictable.

Certainly, concentrating on less risky core businesses is the aim of Gifford. He also said Tuesday that he will trim FleetBoston's exposure to Argentina, where the bank recently lost $1.1 billion, and is cutting its venture capital portfolio almost in half.

Investors hailed the announcements, bidding up FleetBoston shares by $2.70 to $36.18 on the New York Stock Exchange.

FleetBoston bought Robertson Stephens "when technology was humming along, and for a while it got better," said Mark T. Fitzgibbon, a bank analyst at Sandler O'Neill & Partners. "1999 and 2000 were great--they were minting money."

But when technology crashed, so did Robertson Stephens' profit. The firm lost $61 million for FleetBoston during 2001, contrasted with a profit of $216 million in 2000.

Robertson Stephens, founded in 1978, was one of the "four horsemen," four small San Francisco investment banks that specialized in raising capital for the burgeoning tech industry. All were ultimately purchased by larger firms, with San Francisco's BankAmerica Corp. snapping up Robertson Stephens in 1997.

NationsBank Corp. of Charlotte, N.C., meantime, had purchased Montgomery Securities, Robertson Stephens' rival. When NationsBank acquired BankAmerica and became Bank of America Corp., Robertson Stephens was sold to BankBoston, which became FleetBoston Financial after another bank mega-merger in March 1999.

BankBoston's deal for Robertson Stephens was valued at $800million--a $400-million payment to Bank of America and another $400million over four years in retention bonuses and options to Robertson Stephens employees.

A study of Robertson Stephens done in connection with an employee stock plan valued the firm at $700 million last July, but insiders said the continuing problems in the tech industry have eroded that amount by at least $100million, and probably more.

Indeed, it's unclear who might be a buyer. Fitzgibbon said a foreign purchaser is most likely, because big U.S. financial firms with an interest in the tech niche already have a presence there.

A leading technology banker said he was surprised that Gifford had chosen to announce a public auction, which the banker said would accelerate an already highly noticeable series of employee departures from Robertson Stephens. He mentioned Deutsche Bank, UBS Warburg or HSBC, all large European financial firms, as potential bidders.



A Small Slice of the Pie

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