Aggressive Baer buys bank to boost managed assets by 40%
Source: Agencies |
August 14, 2012, Tuesday
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Print Edition
Print Edition
SWISS private bank Julius Baer is to buy Bank of America's non-US Merrill Lynch wealth manager, paying 860 million Swiss francs (US$882 million) for the loss-making business to boost its assets managed by 40 percent and backing the deal with plans to raise 1.19 billion Swiss francs in new capital.
The acquisition, the latest in a string of purchases for Baer, is the bank's most assertive move since it bought Ehinger Armand von Ernst, Ferrier Lullin & Cie, BDL Banco di Lugano and asset manager GAM for 5.6 billion francs from UBS in 2005.
"To us, this looks like a defensive and value-destructive transaction," said Dirk Becker of Kepler Capital Markets. Becker criticized dilution which he calculates to be 15 percent more shares and questioned how an unprofitable business can add to Baer's earnings.
Baer said it has 530 million francs in cash to help fund the deal but will also seek to raise 750 million francs in a rights issue, including 250 million francs to fund further potential buys. It also plans to raise another 200 million francs in hybrid bonds.
Additionally, it will grant Bank of America 240 million francs worth of shares, making the Charlotte-based bank a 3 percent shareholder. The Swiss bank said it is also cancelling its share buyback program which was set at up to 500 million francs in February.
The deal will also cost 400 million francs in restructuring and integration and retention costs, Baer said, including 120 million francs to ensure Merrill's most productive client advisers stay with the business.
As a result the bank will boost its managed assets by 40 percent to 251 billion francs.
The acquisition, the latest in a string of purchases for Baer, is the bank's most assertive move since it bought Ehinger Armand von Ernst, Ferrier Lullin & Cie, BDL Banco di Lugano and asset manager GAM for 5.6 billion francs from UBS in 2005.
"To us, this looks like a defensive and value-destructive transaction," said Dirk Becker of Kepler Capital Markets. Becker criticized dilution which he calculates to be 15 percent more shares and questioned how an unprofitable business can add to Baer's earnings.
Baer said it has 530 million francs in cash to help fund the deal but will also seek to raise 750 million francs in a rights issue, including 250 million francs to fund further potential buys. It also plans to raise another 200 million francs in hybrid bonds.
Additionally, it will grant Bank of America 240 million francs worth of shares, making the Charlotte-based bank a 3 percent shareholder. The Swiss bank said it is also cancelling its share buyback program which was set at up to 500 million francs in February.
The deal will also cost 400 million francs in restructuring and integration and retention costs, Baer said, including 120 million francs to ensure Merrill's most productive client advisers stay with the business.
As a result the bank will boost its managed assets by 40 percent to 251 billion francs.
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