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Sources Say Shearson Expected To Announce Facelift

May 18, 1990

NEW YORK (AP) _ Shearson Lehman Hutton Inc., coping with recent management upheaval and big losses, is expected to reorganize by uncoupling its investment banking and brokerage operations and possibly changing its name, company sources said Friday.

The plan, which is likely to be announced by month’s end, could help rehabilitate the image of the troubled American Express Co. unit, whose losses neared $1 billion last quarter, company executives familiar with the proposed realignment said.

Shearson is the nation’s second-largest securities company behind Merrill Lynch & Co. It grew by leaps and bounds in the boom years of the 1980s but has faced increasing financial and management problems in the aftermath of the 1987 stock market crash.

Under the proposed reorganization, the company’s various divisions would be split between two new operating units, according to the company sources, who spoke on condition of anonymity.

The retail brokerage and asset management businesses would be combined into one unit, which would include about 10,000 stockbrokers catering to individual investment needs, the sources said. It would probably retain the Shearson name, they said.

The other unit would focus on corporate finance, including the firm’s investment banking and capital markets operations, and could operate under the resurrected name of Lehman Brothers, once one of the most trusted names on Wall Street.

Sherman R. Lewis Jr., currently head of investment and merchant banking, and Richard S. Fuld Jr., head of capital markets, are likely to head that unit, they said.

The parent company probably would also change its name, to either Shearson Lehman Holdings Inc. or SLH Holdings Inc., with the two separate divisions under it, the sources said.

Steven Faigen, a spokesman for Shearson, said he couldn’t confirm or deny the reorganization plans.

″At this time the firm is examining a number of options that would result in a more customer-driven organizational structure,″ he said Friday. ″But we haven’t made any decision on exactly how we’ll move ahead on that score.″

Securities analysts said reorganizing would be a positive step for Shearson, which has struggled to integrate its numerous acquisitions over the years.

″It would give it a new identity,″ said Perrin Long, of Lipper Analytical Services Inc.

Long added that such a plan might also make it easier for American Express, which has a controlling stake in Shearson, to sell the firm some time down the line. American Express has denied it has any plans to sell Shearson or any of its parts.

In addition, Long said that by reviving the Lehman Brothers name for its investment bank, Shearson ″could help to keep good people within the old Lehman organization.″

Shearson, formerly known as Shearson-American Express, acquired Lehman Brothers, Kuhn Loeb Inc. in 1984. The merged Shearson Lehman purchased E.F. Hutton & Co. in 1988.

The proposed reorganization reportedly has been in the works since Howard L. Clark Jr., a former American Express official, became Shearson chairman earlier this year, replacing Peter A. Cohen, who resigned.

Clark was unavailable for comment, Shearson officials said.

During the first three months of 1990, Shearson lost $915 million - the largest in securities industry history - mostly to pay for a restructuring that included 2,000 layoffs and business cuts initiated by American Express.

American Express, which currently owns 61 percent of Shearson, recently signed an agreement to buy the rest of its outstanding common shares. American Express was forced to inject more than $1 billion into Shearson to shore up its finances.

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