CS First Boston to Buy DLJ for $11.5 Billion

SAN FRANCISCO (08/30/2000) - Credit Suisse First Boston announced Wednesday it had agreed to acquire Donaldson, Lufkin & Jenrette Inc. for US$11.5 billion, or $90 a share.

DLJ stock climbed 24 percent on talk of the merger Tuesday. DLJDirect, the tracking stock for DLJ's online brokerage unit, soared as much as 33 percent Tuesday.

A merger of this scale would create a global powerhouse of investment services for clients that range from high-end institutional investors to individual online traders. Owned by Zurich-based Credit Suisse Group , CS First Boston had $9.8 billion in revenue in 1999, while DLJ brought in $7.1 billion in revenue during the same period.

As a combined entity, DLJ's strength in high-yield debt underwriting would complement CS First Boston's position in the equities market. Similarly, the middle-market customers that DLJ serves would add to CS First Boston's solid base of institutional customers.

DLJ also has a majority ownership in DLJDirect, the online trading arm of the investment bank that went public last year as a tracking stock. CS First Boston has no services for individual investors, but it is working on an Internet-based investment service that would target high-net-worth investors, according to one person familiar with the service.

Investors and financial analysts have speculated about consolidation in the online brokerage industry during recent months, following the market's recent slide. After Ameritrade's CEO stepped down this month, rumors circulated that American Express Co. was in talks to buy the brokerage. No such deal has yet been reached.

DLJDirect, which targets individual investors with higher assets than E-Trade or Ameritrade, has had a particularly rough time during recent months. Fixed advertising expenses combined with lower trading activity and slow account growth caused the company's customer acquisition cost to soar during the second quarter. The company reported a loss of $6.6 million after earning $13.6 million during the first quarter.

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