amp100109
On the homepage
Vikings
Out There
Pardon Board
Petters
Ameriprise buying BofA fund business
Acquisition of Bank of America's Columbia Management for $1 billion will double the size of Ameriprise's asset management business.
Print this story
E-mail this story
Save to del.icio.us
Share on Facebook
Share on Digg
Minnesota business by the numbers
See Minnesota's top earning companies, CEOs and non-profits
More from Business
Ameriprise Financial Inc. of Minneapolis, indirectly benefiting from Wall Street's meltdown, nearly doubled the size of its asset management business Wednesday when it agreed to acquire Bank of America's Columbia Management mutual fund business for about $1 billion in cash.
The final price of the deal, widely anticipated in the financial industry, will be somewhere between $900 million and $1.2 billion, depending on how Columbia's $165 billion in assets under management change by the time the transaction closes next spring.
Bank of America has been seeking to raise cash after its balance sheet was hurt by the acquisition of Wall Street firm Merrill Lynch, which suffered bigger-than-expected losses. It had been told by regulators to raise $33.9 billion after the government surveyed the financial health of the country's largest banks.
"This is a good deal, both strategically and financially," said Jim Cracchiolo, Ameriprise chairman and CEO. Including costs of the acquisition, the Columbia operations would add to earnings two years after the deal closes, he said.
Investors also liked the deal. Ameriprise shares rose $3.99, or 12.3 percent, Wednesday to close at $36.33, their highest price in nearly a year.
The deal happened partly because of Bank of America's need to raise cash.
"This could be considered a once-in-a lifetime opportunity for Ameriprise because of the size of the deal and because you don't always have a seller as motivated as the Bank of America was," said Alan Rambaldini, an analyst at Morningstar in Chicago. "Ameriprise is paying a good price because it's less than 1 percent of $165 billion in Columbia's assets under management."
Rambaldini said Ameriprise was in a better position than others to acquire the Bank of America operations because it had been raising cash for potential acquisitions for some time.
Earlier this year, Ameriprise Financial raised $868.5 million through a secondary offering, but didn't identify an acquisition target. Cracchiolo said Wednesday that Ameriprise had been working on the Bank of America deal for about six months.
Financially, the deal doubles the size of Ameriprise's asset management business, and as a result is expected to raise its profit contribution to about 20 to 25 percent of net earnings, compared with 10 to 12 percent today, Cracchiolo said.
Strategically, the acquisition will make Ameriprise the eighth-largest mutual fund firm in the United States, and the No. 20 asset management firm worldwide, Cracchiolo said. The Columbia Management deal follows Ameriprise's acquisition last year of J. & W. Seligman & Company's mutual-fund and hedge-fund businesses for $440 million.
Ameriprise will become a much bigger player in the second tier of asset management companies, with assets between $100 billion and $700 billion, Rambaldini said. Top-tier asset management firms have assets of $700 billion to over $1 trillion.
"Because we've come out of the market meltdown as a stronger company, we're in a strong position today and able to execute a deal like this," Cracchiolo said.
In an unrelated development, Royal Bank of Canada (RBC), which has operations in the Twin Cities, agreed Tuesday to acquire J.P. Morgan's Third Party Registered Investment Advisor operations for an undisclosed sum. That deal is not expected to close until the second quarter of next year.
Steve Alexander • 612-673-4553
Recent Business stories
Former US House Speaker Newt Gingrich sets Cincinnati town hall on jobs, 1st of planned series - September 30, 2009
Former US House Speaker Newt Gingrich sets Cincinnati town hall on jobs, 1st of planned series - Former U.S. House Speaker Newt Gingrich has scheduled the first of a planned series of town halls on jobs for Cincinnati next week. More
Blog: Patent Pending
Lights out at U energy conference. Irony police notified.
Just as Lawrence Kazmerski, a top official at the National Renewable Energy Laboratory, was about to give the keynote address at the University of Minnesota's annual E3 conference at the RiverCentre in St. Paul, the lights went out, bathing the audience in darkness and a deep sense of irony.
Comment on this story | Be the first to comment | Hide reader comments