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August 13, 2012 at 05:40 AM
Zurich-based money manager Julius Baer has agreed to purchase the non-U.S. wealth management units of Bank of America Corp.’s Merrill Lynch. The deal is expected to increase Baer’s assets by approximately 40%. Neither analysts nor investors appeared enthusiastic about the move, however, as the former issued caveats about its potential and the latter drove the stock down in Zurich trading.
Bloomberg reported Monday that Baer made the announcement that it would pay about 860 million Swiss francs ($880 million) for the business. The full cost of the deal will run 1.47 billion francs. That includes incentives to keep Merrill bankers; 312 million francs after taxes to integrate the new purchase; and 300 million francs to boost regulatory capital.
The firm has canceled a proposed share buyback and instead intends to launch a rights offering of 750 million francs to help pay for the deal. The cost represents 1.2% of assets under management. It is based on a transfer of some 72 billion francs in client funds, nearly 89% of the 81 billion francs managed by the Merrill units as of June 30, during the two years integration is expected to take.
Baer is working to boost its AUM, as previously reported by AdvisorOne, with tax evasion crackdowns globally taking a toll as clients repatriate money formerly held in Swiss accounts. Analysts, however, are not excited about the deal, finding fault with various aspects of the transaction.
