On Breakingviews: Credit Suisse may buy Michael Klein’s boutique and merge it with a soon-to-be-spun-off investment bank. That means putting a price on M. Klein & Co and First Boston, neither of which is easy, writes LiamWardProud
that Klein’s brother, who also works at the boutique, may join First Boston as part of the deal.
Just as important as Klein’s value is the worth that Credit Suisse ascribes to First Boston. Since it’s unlikely to be a cash deal, Klein’s real reward will be the value of the stake he gets in the combined company. The size of that holding depends therefore on the relative worth of First Boston and M. Klein & Co. The higher the value of Klein’s shop compared with First Boston, the more he’ll own.
trades at 90% of forward book value. That would imply a valuation of $3.6 billion. If M. Klein & Co is valued at $200 million, for example, its shareholders, including Klein himself, would get 5% of the combined company in an all-share combination, according to Breakingviews calculations. But that critique misses the bigger picture. If Klein makes money, Credit Suisse shareholders would do very well too. The bank’s bombed-out equity value of less than $14 billion is not much more than the price tag analysts ascribe to its domestic Swiss business, which implies that the investment banking unit has at best no value at all.
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