Capital Chronicle writes on the likely demise of the Queen's broker as it seeks to consummate its joint venture with JP Morgan...

    Sold on the cheap appears to be the consensus opinion of City comment over the weekend.

    Contrary to some of the gushing and fatuous PR comment reported at the week-end ("it looks like we're taking them over"), reaction through much of the company was muted and the deal was not immediately regarded as a cause for celebration. The Extraordinary General Meeting, when it comes, may well be very interesting if, as one suspects, there are a number of unhappy shareholders.

    Some points of note:

    * the process leading to this point was kicked-off, apparently, by a McKinsey report; and what makes the consultants qualified brokerage experts this time around is questionable;

    * it appears the business rational has not been effectively articulated to some members of staff who ought to have been briefed; and

    * joint ventures (JVs) are operationally challenging to make effective, to put it mildly.

    Many of the stated aims of the exercise could have been achieved without the JV and it's associated costs in fees to lawyers and accountants. The same goes for the minimisation of the stated risks - what now, for example, is the career path for the young stars at Caz to be? Equally, much of the financial reward could be have been passed to the existing owners by means of a special dividend of, say, 50p per share in addition to the normal dividend. Further, some of the other excess capital (convertible preference shares) could have been repurchased early, further improving the ROE.

    In addition, the protagonists allege that the sum of the parts will be greater. Well, maybe. What they haven't addressed is that there is nothing really wrong with the current business model. Impartial advice is a key niche.

    Indeed, what might have been examined properly by Cazenove are the huge opportunities there will be in Germany as middle sized firms sell up and the likes of Commerzbank retreat; and in the newly emergent countries in Eastern Europe - in particular the Czech Republic, Hungary, Poland and Romania. Granted, Cazenove has an office in Germany, but it is small, and opened only in late 2000.

    Finally, the Mayhew succession. This is a non-issue - he could easily become a part-timer and supervise the Company for years to come. But, frankly, no one is indispensable and, sadly, it looks like his legacy will be the one of the man who sold the bank on the cheap.

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