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A New Alliance for Sanford Bernstein

By Rick Aristotle Munarriz (TMF Edible)
June 21, 2000

Summary: Alliance Capital said it will buy privately held Sanford C. Bernstein & Co. in a cash and stock deal worth just shy of $3.5 billion. One Fool wonders whether a stifling corporate culture at the former will lead to mass defections from the latter.

Do opposites attract? Growth mutual fund specialist Alliance Capital (NYSE: AC) will be paying $1.5 billion in cash and issuing 40.8 million in new limited partnership units to purchase value maven Sanford C. Bernstein & Co.

The combined companies will claim $475 billion of assets under management with annual revenues of $3.2 billion. On its own, Alliance had $394 billion under management at the close of the March quarter. Alliance is popular with corporate benefit plans, public employee retirement funds, and folks who really, really, really like to pay loads on their mutual fund investments. (It's those huge loads that both make Alliance lousy for mutual fund investors and an attractive buyout candidate.)

Buying up asset management companies has become even trendier than picking up your kids in a Honda Odyssey. We wrote about a French company's move to buy Nvest (NYSE: NEW) just last week, and Alliance hasn't been the only other shoe to drop since then. Old Mutual agreed to buy United Asset Management (NYSE: UAM) just a few days later.

Bernstein serves a wealthy private client base with an emphasis on value-style investing. Its employees may or may not believe Alliance CEO Bruce Calvert's claim that "employees will have an exciting new range of career opportunities" as a result of the merger.

But after Michael Lewis' scorcher of an article on Alliance yesterday -- in which he blasted the circulation of an Alliance employee booklet that covered everything from "Elevator Etiquette" to "Restroom Behavior" -- one lingering question remains: Did Alliance make Bernstein execs wash their hands before they shook hands on the deal? It's a joke, sure, but trying to get a handle on two companies' compatibility from a cultural standpoint can be as important as getting the financial impact figured out where mergers are concerned. Asset management businesses, for example, are valued as much in terms of their personnel as their portfolios, so defections would be frowned upon.

Does Calvert's move to celebrate the spirit of individual expression by praising each firm's "distinctive style" clash with the booklet that stipulates exactly how low knotted ties should hang? Unfortunately, the mini-manual does not have a section on the proper use of irony.

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