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FleetBoston Decides to Close Robertson Stephens

Banking: Firm has been unable to find a buyer for its tech-focused boutique investment house since putting it up for sale in April.

July 13, 2002|E. SCOTT RECKARD | TIMES STAFF WRITER

Saying that no domestic or foreign buyer can be found for Robertson Stephens Inc., FleetBoston Financial Corp. decided Friday to close the boutique San Francisco investment bank, whose fortunes rose and fell with the tech industry it helped finance.

FleetBoston, the nation's seventh-largest bank, has been shedding operations not central to its core consumer and commercial banking. Since it put Robertson Stephens on the auction block in April, several financial institutions in the United States and abroad have backed away after expressing some initial interest, a bank spokesman said.

Top managers at Robertson Stephens had hoped to put together a buyout of the onetime Silicon Valley star. FleetBoston owns 77% of the investment bank, whose employees own the other 23%. FleetBoston and Robertson Stephens announced in late June that "an agreement to work together" had been reached, and in a final maneuver, the investment bank said Wednesday that it was firing 425 of 950 workers to cut costs and pay for a possible buyout.

Despite several weeks of talks, "Fleet and the Robertson Stephens management team were unable to structure an agreement," FleetBoston Chief Financial Officer Eugene McQuade said in a statement. "As a result, we have decided a wind-down is in the best interests of our shareholders."

The attempted auction of Robertson Stephens came after the technology sector was flattened by a two-year bear market. What's more, the investment industry has seen its reputation damaged by corporate scandals, particularly allegations that analysts acted as shills for bankers, generating huge fees by pushing stocks they privately acknowledged were of little value.

"I can't think of a worse time to sell," Robertson Stephens Chief Executive John Conlin told the firm's staff Friday afternoon.

The technology firms that Robertson specialized in funding were booming in 1998, when FleetBoston bought Robertson Stephens from Bank of America Corp., paying $800 million in cash and options.

At the time, big U.S. banks had been on an acquisition tear to diversify their holdings.

"Robertson Stephens was in the sweet spot of the tech boom that encompassed the capital markets in the late 1990s," said RBC Capital Markets analyst Gerard Cassidy. "When those markets collapsed, it brought Robertson Stephens down with it, and unfortunately the owner, FleetBoston, got caught holding Robertson Stephens."

Robertson was one of four Northern California investment houses that caught the tech wave early. By the time it crested at the end of the 1990s, all four--the others were Hambrecht & Quist Inc., Alex. Brown & Sons Inc. and Montgomery Securities Inc.--had been purchased by big commercial banks.

Robertson took public several Internet firms. Though some, such as E-Trade Group Inc. and MapQuest.com have survived, many others are struggling or have gone out of business.

Even before FleetBoston's announcement, Robertson employees had started to leave the firm. But to the end, Robertson's management maintained it had a future, albeit as a far smaller company.

In his final remarks to employees, Conlin criticized Fleet's decision to kill his firm.

"This is not a company that had to be shut down" he said. "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."

Boston-based FleetBoston, parent company of Fleet Bank, said last week that losses from attempting to sell Robertson Stephens would lower its earnings by $282 million for the quarter ended June 30. Robertson Stephens lost $61 million last year, compared with a $216-million profit in 2000.

Associated Press and Dow Jones were used in compiling this report.

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