From the October 24, 1997 print edition

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R-H expansion plans include Boston, London

The Robinson-Humphrey Co. has tentative plans to open offices next year in Boston and London.

The expansion is proposed in the investment firm's 1998 budget, which has not yet been formally approved.

R-H executives said a Boston office would bring the firm's institutional sales effort closer to fund managers such as Fidelity Investments and John Hancock Investors Trust, both based in Boston.

A London office would allow Robinson-Humphrey to sell research products and boost its corporate-finance practice in Europe. Robinson-Humphrey has been active in international finance since the 1960s but does not have a physical presence overseas.

Although R-H executives said the company will not lose focus on the Southeast, the expansion highlights what could shape up to be a broader role for Robinson-Humphrey under Salomon Smith Barney, the global investment firm proposed under a merger of Smith Barney Inc. and Salomon Bros.

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Robinson-Humphrey is a subsidiary of Smith Barney, and both are units of New York-based Travelers Group Inc.

As investment banks disappear under the nameplates of super-regional banks, Robinson-Humphrey has preserved its name through two acquisitions in 15 years. Now, the storied Atlanta investment bank aims to spread its reputation beyond the Southeast.

"Our parent has given us the green light to grow," said Thomas K. Tracy, who was named CEO of Robinson-Humphrey in January. "This recent merger is going to encourage us to get wider and wider with our coverage."

Wave of consolidation

The expansion is also likely to quell criticism that Travelers, in integrating some of R-H's functions with Smith Barney, has turned the Atlanta firm into little more than Smith Barney's country cousin.

Sandy Weill, chairman of Travelers, said Robinson-Humphrey has an important role as a part of the financial services giant. It is estimated Robinson-Humphrey would fetch 10 times the price Travelers paid American Express Corp. for Robinson-Humphrey in 1993.

Weill said selling Robinson-Humphrey is not in the plan. "We're not going to do that," he said in an early October interview in Atlanta. "It's a terrific organization that can really relate well to corporations in this part of the country."

A wave of consolidation in the investment banking industry has hit some of R-H's biggest competitors this year: Montgomery Securities, Alex. Brown, and Dillon Read all have agreed to be bought. The disruption in the industry is a competitive advantage for Robinson-Humphrey, said R-H Chairman Jerry Sands.

"We're already home," Sands said.

"For a long time, Robinson-Humphrey was the Atlanta stock market," said Mark Vitner, an economist at First Union Corp. He said falling barriers between banks, insurance companies and investment banks, and the subsequent consolidation of those industries, will make regional brokerages/investment banks even more profitable.

"The South is such a distinct region that the investment bankers who live here have an entirely different perspective than they would over someone trying to do deals from New York," Vitner said.

Decisions on direction

Pitched in advertisements as "A Little South of Wall Street," Robinson-Humphrey prides itself on having a century-old history of providing retail brokerage, equity research and corporate-finance services to companies across the Southeast.

But R-H's identity as the white-shoe investment bank for only Southeastern companies is changing, Tracy said. The firm's research expertise, for instance, has gained recognition among investors worldwide, he said.

Expanding into more markets has prompted R-H executives to look inward to redefine the company's direction, Tracy said.

A 10-member committee of R-H employees is looking for answers to questions such as " `Who are we?', and `Who do people think we are?' " Tracy said. "We are in the process of deciding who we are and where we want to be in the future." The committee will present a report to R-H's executive committee by year end.

Casualties of change

Despite two ownership changes and the loss of top-producing stockbrokers in recent years, R-H's revenue grew to $550 million in 1996, compared with $490 million in 1995 and $65 million in 1981.

When Robinson-Humphrey sold to American Express in 1982, some competitors predicted the company's disappearance. Instead R-H's revenue has increased an average of 15 percent a year.

The ownership changes have not come without casualties.

Robinson-Humphrey went through a spell in late 1995 and 1996 when competitors lured its stockbrokers away with lucrative signing bonuses. Within a year, almost 20 R-H brokers left the firm. Suddenly, the local firm known for taking care of its own was faced with a problem it had rarely encountered before: turnover.

Tracy said employee retention "has not been a problem for us in 1997."

One key to success -- and some say an occasional source of friction -- has been R-H's affiliation with Smith Barney.

Under the deal negotiated four years ago with Smith Barney, Robinson-Humphrey maintains its own research department and leverages its analysts' industry coverage to help sell retail brokerage and corporate-finance services.

Advantages of deal

On the retail side, R-H stockbrokers rely on Smith Barney's back-office support and can tap Smith Barney's research expertise, but the two firms avoid competing for each other's clients. In corporate finance, however, Robinson-Humphrey operates more independently, sometimes competing with Smith Barney for underwriting deals.

This so-called "dual brand" strategy is a virtually transparent advantage for clients, said Mark Chancy, R-H's CFO.

"An R-H broker can wear either hat: He can wear the hat of an internationally recognized Smith Barney broker with large-cap research product and excellent money management, or he can wear the hat of the regional, 103-year-old Robinson-Humphrey broker with middle-market names to sell to his customers," Chancy said.

In addition to catering to Southeastern firms, R-H's corporate-finance division is beginning to do more deals overseas, said Bill Sherman, a managing director of R-H's corporate-finance division.

"Previously, we were doing a lot of business with U.S. companies that were looking for overseas buyers," Sherman said. "In the past 18 months, we've been working with more European companies looking for advisory services and sources of capital in the U.S."

Robinson-Humphrey was co-manager of the $176 million initial public offering of Ryanair Holdings Plc, a Scotland-based discount airline. In a deal to be filed in late October, Robinson-Humphrey is lead manager of an offering to raise $65 million in the United States for a London-based firm.

"The success we had with Ryanair has opened a lot of eyes," Sherman said.

Roderick Dowling, head of corporate finance at Robinson-Humphrey, said, "We're not leaving the Southeast -- 50 percent of our revenue is still in the Southeast. But what we've done is taken a Southeastern company and gone more national and taken on much bigger competitors, the Morgan Stanleys, the Goldman Sachs of the world."

Plenty of suitors

As one of Atlanta's oldest companies, Robinson-Humphrey developed a close-knit corporate culture. The firm was founded as a municipal bond firm by an entrepreneur named Roby Robinson in 1894.

Robinson and William G. Humphrey, a bond trader from Toledo, Ohio, eventually incorporated The Robinson-Humphrey Co. in 1902. As the old story goes, Trust Co. Bank of Georgia, the predecessor to SunTrust Banks Inc., was rebuffed in an effort to buy Robinson-Humphrey in 1917.

Today, SunTrust executives still covet Robinson-Humphrey.

"Any organization would be crazy not to want to be associated with an organization as respected as Robinson-Humphrey," SunTrust Chairman James B. Williams said before SunTrust agreed in early October to buy Equitable Securities Inc. of Nashville, Tenn.

Roby Robinson III, grandson of the founder and current R-H president, said Robinson-Humphrey didn't become the Southeast's leading investment bank without overcoming its share of challenges. He says the modern-day Robinson-Humphrey has overcome the skeptics' predictions of the death of regional investment banks.

"We have always been looked at as an equity firm and had a reputation for our knowledge of stocks in the Southeast," Robinson said. "We continue to serve that role, but we've evolved into having more of a national thrust."

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