CHICAGO - First Chicago NBD Corp. is describing its $95 million buyout of Detroit-based Roney & Co. as a gambit to boost its retail brokerage and underwriting presence in several key Midwest markets.
The company hopes the cash and stock acquisition announced late Tuesday will significantly strengthen the bank's current position in Michigan and Indiana, while opening new opportunities in Ohio. Roney operates four offices in Ohio; First Chicago has none.
"The primary motive was the attractiveness and high quality of their 300 brokers and 100,000 client accounts," said First Chicago spokesman Thomas Kelly. "The geographic match was nice too. We are a leading bank in almost all of their markets."
First Chicago has tried in the last several years to expand its retail brokerage business through means such as a partnership with Robert W. Baird & Co. "This (acquisition) will really fit our needs. It's a nice match," Kelly said.
The 72-year-old, closely held Roney operates 19 branch offices in Michigan, five in Indiana, and four in Ohio with a combined 700 employees. It is the largest securities brokerage and investment banking firm headquartered in Michigan.
First Chicago's broker-dealer subsidiary First Chicago NBD Investment Services Inc. hopes to retain Roney's customers and thereby increase its client list to 300,000 from 200,000. It would beef up its broker ranks to 500 from 200 in the buyout. No job cuts are expected, First Chicago officials said.
Potential gains in the bank's underwriting business seem limited mostly to Michigan.
Roney ranked 126th nationally among senior managers last year and underwrote 50 issues worth $91.3 million, a fraction of First Chicago Capital Markets Inc.'s $1.8 billion in 93 deals, good for 17th place. So far this year, the firms rank 137th and 26th nationally, respectively.
Nearly all of the deals Roney has led recently - $85.9 million worth last year and $55.1 million in 1997 - have been in Michigan. According to Securities Data Co., it placed 15th in the state last year and 21st year to date, compared with 23d and 20th for First Chicago. First Chicago's volume in Michigan has been growing, according to Securities Data.
Those trends are mirrored in co-managing work, where Roney has been a bit player nationwide but a bigger participant in Michigan. It ranked seventh among the state's underwriters last year and 15th through October, compared with fourth and third for First Chicago.
The deal marks a relatively inexpensive step on First Chicago's part to follow a market trend, said one equities analyst. "They look at the landscape and see a lot of banks picking up smaller companies like this and realize they have to do something. It gets you in the game and $95 million isn't too big of a risk," said James Schutz of ABN AMRO Chicago Corp.
The buyout announcement confirmed reports circulating since early this year that Roney was in the market for a buyer. Comerica Inc., First of America Bank Corp., and Robert W. Baird had been rumored to be interested in Roney.
First Chicago officials said the purchase price involved "a little more cash than stock," but wouldn't be more specific. The transaction must receive regulatory approval and is expected to be completed in the first quarter of 1998.
Roney will continue operating under its current name, and President Robert J. Michelotti will stay in his post.
