Swiss private banking company Julius Baer Group Ltd (SWX:BAER) on Monday said it had struck a deal to buy Merrill Lynch’s international wealth management (IWM) business outside the US for CHF860m (USD880.2m/EUR716m) from Bank of America Corp (NYSE:BAC), or BofA, as part of its growth strategy.
Under the terms of the agreement, comprising a combination of legal entities acquisitions and business transfers, the Swiss group will add up to CHF72bn in assets under management (AuM) to its private banking portfolio, with two thirds of these assets to come from growth markets in Asia, Latin America and the Middle East.
The addition will increase Julius Baer’s AuM by around 40% to CHF251bn at the end of the two-year integration period, bringing its total client assets to CHF341bn, the buyer said.
Most of the business to be bought is based at locations where Julius Baer already has a presence, and the deal also adds new locations in Bahrain, the Netherlands, India, Ireland, Lebanon, Luxembourg, Panama and Spain to the group’s network. After this transaction, the Swiss company’s business will span over 25 countries and 50 locations worldwide.
The buyer also sees a contribution to its EPS from this deal in 2015, when it targets an EPS accretion of around 15%, it said.
Julius Baer plans to finance the transaction with a mix of CHF530m existing cash, a CHF200m issue of new hybrid instruments and CHF740m new share capital, of which it would issue CHF240m-worth of shares to BofA.
The regulatory capital needed to support incremental risk-weighted assets on the business to be bought is expected to be around CHF300m, Julius Baer said, adding that it also expects to spend some CHF400m on integration and retention costs.
The agreement also includes an accord between the parties where BofA will provide global equity research and other products and services to Julius Baer, as well as a pact related to cross-referral of clients between them. Some 2,000 employees, including more than 500 financial advisers, will join the Swiss company as part of this deal.
Completion, subject to shareholders and regulatory approvals, is expected by the end of 2012, or early 2013, while the transfer and integration are seen to take place during a two-year period after that and to wrap up in the fourth quarter of 2014, or first quarter of 2015.
Perella Weinberg Partners acted as advisor to Julius Baer Group