CAZENOVE could agree a joint venture deal with JP Morgan Chase within two weeks.

The two have discussed the plan for more than a month. Under the terms of the offer, shareholders — comprising executives, staff, former partners and institutional investors — will be paid a special dividend of up to £400 million.

The dividend will be paid from £300 million of Cazenove’s capital and £100 million from JP Morgan. The investment-banking operation at Cazenove, which employs more than 600 people, will merge with that of JP Morgan, which has 50 staff.

In exchange for contributing staff, £100 million, and freeing up Cazenove’s capital for the dividend payout, JP Morgan will receive 50 per cent of the profits in the joint venture.

The merged investment banking business will be a subsidiary of Cazenove Plc, where shares will still be held by Cazenove’s staff, with 10 per cent held by outside institutions. The investment management subsidiary, which manages money on behalf of the Queen, will be run separately.

Cazenove is thought to have received approaches about a sale of the investment management division but wants to remain in fund management for the time being.

A shareholder in Cazenove said yesterday the offer appeared to be a good one because there was the possibility of another dividend payout in the future if the venture grows successfully. Both sides have an option to end the agreement within five years if it does not develop as planned.

The structure of the deal is aimed at maintaining Cazenove’s independence and mirrors a number of deals arranged by Flemings, the bank that is now part of the JP Morgan Chase group. Many of Flemings’ staff are expected to move over to the new venture.

THE MEN IN THE MONEY

DAVID MAYHEW

David Mayhew, chairman of Cazenove and one of the City’s leading corporate brokers, will make an estimated £5.7 million in the deal. It is a far cry from the day, 16 years ago, when he was charged in connection with the Guinness affair. Cazenove supported him throughout the scandal, which raised questions over Guinness’s bid for Distillers, and the charges were dropped. Mr Mayhew, who has for three decades been in the thick of many of the City ’s biggest takeover battles, is Cazenove’s largest individual shareholder. Some have questioned whether the firm’s fortunes are too wrapped up with his presence in one of the last remaining investment banks.

JOHN PAYNTER & ROBERT PICKERING

John Paynter, deputy chairman, and Robert Pickering, chief executive, are the next biggest individual shareholders in the broking firm. Together they could make more than £9 million in the deal. Both qualified in law before joining Cazenove. Mr Paynter, with 3.2 million shares, could be paid an initial dividend of more than £5 million. He joined the firm in 1979 and spent two years in Sydney before returning to London to work in corporate finance. Mr Pickering qualified at Allen & Overy before joining the firm 19 years ago. He could pick up £4.1 million.