Ameriprise To Acquire Columbia Asset Management Operations

An insurer has agreed to buy a long-term mutual fund business from Columbia Management, a unit of Bank of America Corp.

Ameriprise, Minneapolis, expects to pay about $900 million to $1.2 billion in cash for the Columbia Management fund operations.

The final price will depend on Columbia Management’s net asset flow at closing, Ameriprise says.

Columbia Management, Boston, manages about $93 billion in stock fund assets and $72 billion in bond fund assets. Ameriprise is not acquiring the Columbia Management money market funds or other cash operations from Bank of America, Charlotte, Ameriprise says.

After completing the deal, Ameriprise would have about $400 billion in assets under management and be the eighth largest of long-term mutual funds in the United States, the company says.

The mutual fund industry uses the term “long-term fund” to refer to funds that invest mainly in stocks, bonds and similar asset classes, as opposed to money market funds.

“Using prudent assumptions for market appreciation and other factors, we expect the transaction to generate returns that are substantially greater than our cost of capital,” Ameriprise Chairman Jim Cracchiolo says in a statement about the Columbia Management deal.

Ameriprise is able to make the deal because it started the year with a strong capital position and raised more capital in June, Cracchiolo says.

The Columbia Management deal would include a 5-year distribution agreement with Bank of America that would provide “ongoing access to clients of Bank of America-affiliated distributors,” Ameriprise says.

Ameriprise estimates the Columbia Management deal could help it cut $130 million to $150 million in expenses per year from the combined operations.