After months of anticipation, the Columbia Management deal is here, but it doesn't involve the entire asset manager. On Wednesday Bank of America confirmed rumors that it will sell the "long-term asset management business of Columbia" (i.e. Columbia's non-money market business) to Ameriprise Financial for between $900 million and $1.2 billion in cash. The deal involves $165 billion in total assets.
That works out to a price of between 0.55 percent and 0.73 percent of assets, and Ameriprise claims the price is seven times Columbia's EBITDA. Together, Ameriprise's asset management business will boast almost $400 billion in AUM.
The fate of the money fund business remains to be seen.
"Bank of America continues to consider alternatives for the cash business, including retaining the business or exploring a sale," a BofA spokesman told the MFWire.
JPMorgan and Simpson Thacher & Bartlett advised Ameriprise on the deal. Merrill Lynch and Cleary Gottlieb Steen & Hamilton advised BofA.
Ameriprise, fresh from its acquisition of Seligman, appears to mostly prefer the Columbia brand to the RiverSource one. It will continue to use RiverSource's brand for annuities and insurance, and some institutional investments and mutual funds. Otherwise, though, Columbia Wanger and Acorn will keep their brands, while the combined asset management unit will be called Columbia and based in Boston.
Watch for Ameriprise to reach for some economies of scale once the acquisition closes (expected in Spring 2010). Ameriprise expects to save between $130 million and $150 million in "annual net synergies." And Ameriprise will retain strategic distribution for five years via clients of BofA distributors like U.S. Trust.
Ted Truscott -- president of U.S. asset management, annuities and chief investment officer at Ameriprise -- will take over the combined U.S. asset management business. Columbia president Michael Jones will serve as president of U.S. asset management and Columbia chief investment officer Colin Moore will serve as CIO for the combined asset manager.
"This is a fantastic opportunity to turbo-charge the growth of our asset management business," Truscott stated.
Speculation about Columbia's fate has bounced around the industry ever since BofA announced the Merrill Lynch acquisition last fall. The MFWire first reported in June that BofA had narrowed the Columbia to three bidders: Ameriprise, Invesco and Nuveen. At the time, Ameriprise had just revealed plans for a $900 million public offering.
BofA Press Release
CHARLOTTE, N.C., Sept. 30 -- Bank of America Corporation today announced it has signed an agreement to sell the long-term asset management business of Columbia Management to Ameriprise Financial, Inc. for approximately $1 billion, subject to certain adjustments.
On June 30, 2009, the long-term asset management business had approximately $165 billion in equity and fixed-income assets under management. The total consideration to be paid to Bank of America is expected to be between $900 million and $1.2 billion based on net asset flows and investor consents in the period leading up to closing.
Bank of America continues to consider alternatives for the cash investments, or short-term asset management business, currently managed by Columbia.
"The acquisition of Merrill Lynch provided an opportunity to look at our entire portfolio of businesses with an eye toward strengthening our capital position while ensuring that we continue to offer the broadest possible solutions to our customers and clients as one of the world's leading financial services firms," said Joe Price, chief financial officer of Bank of America. "We're pleased to reach an agreement with Ameriprise that is consistent with that goal."
The transaction is expected to close in the spring of 2010, subject to regulatory approvals and customary closing conditions, including fund board, fund shareholder and other required client approvals.
Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 53 million consumer and small business relationships with more than 6,100 retail banking offices, nearly 18,500 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
Bank of America makes certain statements in this press release that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation reform Act of 1995. These statements are not historical facts, but instead represent Bank of America's current expectation regarding the consideration to be received from the sale of Columbia Management's long-term asset management business, the closing date of the transaction and other similar matters. These statements are not guarantees of future events and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Bank of America's control. Actual outcomes and events may differ materially from those expressed in, or implied by, any of these forward-looking statements.
You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed under Item 1A. "Risk Factors" of Bank of America's 2008 Annual Report on Form 10-K and in any of Bank of America's subsequent SEC filings: net asset flows and investor consents and regulatory and other approvals and other transaction closing conditions. Forward-looking statements speak only as of the date they are made, and Bank of America undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
Columbia Management Group, LLC (Columbia Management) is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. Columbia Funds are distributed by Columbia Management Distributors, Inc., member FINRA and SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation.
Please read and consider the investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus which contains this and other important information about the fund, contact your Columbia Management representative or financial advisor or go to www.columbiamanagement.com.
Ameriprise Press Release
Minneapolis — September 30, 2009 — Ameriprise Financial, Inc. (NYSE: AMP) today announced a definitive agreement to acquire the long-term asset management business of Columbia Management from Bank of America for approximately $1 billion in cash. The transaction is expected to be accretive to Ameriprise Financial earnings and return on equity within one year, excluding one-time integration costs.
As of June 30, 2009, Boston-based Columbia managed approximately $93 billion in equity assets and $72 billion in fixed income assets. The cash business managed by Columbia is not included in the transaction.
The combination will:
Create a preeminent asset management business with nearly $400 billion in global assets under management, and the eighth-largest manager of long-term mutual funds in the U.S.;
Include a five-year strategic distribution agreement that provides ongoing access to clients of Bank of America affiliated distributors, including U.S. Trust;
Add extensive talent and a broad lineup of strong-performing retail and institutional investment products to Ameriprise Financial;
Leverage the strength of the well-regarded Columbia Management and Columbia Wanger brands;
Provide opportunities for significant cost savings. The company expects to generate $130 to $150 million in annual net synergies, with approximately half of these savings expected to be realized in the first year and substantially all in the second year.
“This acquisition transforms our asset management business, a core component of our integrated business model, and will significantly accelerate our growth,” said Jim Cracchiolo, chairman and chief executive officer of Ameriprise Financial. “The combined business, which will bring together an extraordinary depth of investment talent, will provide the scale and the investment performance record for us to serve a broad range of investors—;retail, high net worth and institutional.
In addition to being accretive to earnings in the first year, we expect this acquisition to deliver an attractive return to our investors,” Mr. Cracchiolo continued. “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.
“We were able to pursue this compelling opportunity in large part because of the strength of the company and our capital position, which we maintained through the very challenging market conditions of 2008 and early 2009, and which we supplemented in June. Importantly, after the transaction closes, our capital position will remain strong, with continued substantial flexibility.
“I am also confident that we will integrate Columbia Management with Ameriprise Financial efficiently and effectively. Our demonstrated strength in executing complex transactions—;through our spinoff in 2005, our acquisition of Threadneedle and our 2008 acquisitions—;has given us the expertise and experience necessary to make this transaction successful.”
The total consideration to be paid will be between $900 million and $1.2 billion based on net asset flows at Columbia Management before closing. Variations in the total consideration will not affect the company’s earnings and return on equity accretion estimates. The acquisition will be funded through the use of cash on hand.
Ameriprise Financial will retain its strong balance sheet fundamentals after the acquisition closes, with excess capital of more than $1 billion and a strong liquidity position.
The combined asset manager, which will be based primarily in Boston, will operate under the Columbia Management brand. Columbia Wanger and the Acorn family of funds will retain their brands. The RiverSource brand will remain the primary mark for the company’s insurance and annuities entities and certain institutional and mutual funds. Marsico Capital Management will continue to serve as a sub-advisor for certain Columbia Management funds.
The combined U.S. asset management business will be led by Ted Truscott, currently president, U.S. asset management, annuities and chief investment officer, Ameriprise Financial. Michael A. Jones, currently president of Columbia Management, will serve as president, U.S. asset management. Colin Moore, chief investment officer at Columbia Management, will serve that role for the combined organization.
“This is a fantastic opportunity to turbo-charge the growth of our asset management business,” Mr. Truscott said. “Asset management is all about talent, and we are excited about the opportunity to bring together the talents of Columbia, Wanger and RiverSource. In addition, the deal includes broad access to clients of several Bank of America entities, including the high-net-worth investors of U.S. Trust, which creates a significant opportunity to produce future growth in this business.
“We are also excited to work with Tom Marsico and Marsico Capital Management. We have very high regard for the strong track record that Tom and his team have achieved over many years.”
The transaction is subject to customary regulatory reviews and approvals. It is expected to close in the spring of 2010.
J.P. Morgan acted as financial advisor and Simpson Thacher & Bartlett LLP acted as legal advisor for Ameriprise Financial. Merrill Lynch acted as financial advisor and Cleary Gottlieb Steen & Hamilton LLP acted as legal advisor for Bank of America.
Ameriprise Financial to host investor conference call
September 30, 2009 at 10:00 a.m. eastern time
Mr. Cracchiolo; Walter Berman, executive vice president and chief financial officer of Ameriprise Financial; and Mr. Truscott will host an investor conference call at 10:00 a.m. eastern time today. A live audio webcast of the conference call and the presentation slides will be accessible to the general public on the company's investor relations website at ir.ameriprise.com
Legal Notice Regarding Forward-Looking Statements
This news release contains forward-looking statements that reflect management’s plans, estimates and beliefs. All statements other than statements of historical fact included in this news release are forward-looking statements. Examples of forward-looking statements in this release include management’s expectations regarding the assets under management, margin expansion, cost savings and net synergies, market performance, EPS and ROE accretion we would realize following consummation of the transaction subject of this release (the “Columbia acquisition”), estimated purchase price in respect of the Columbia acquisition, and future excess capital and liquidity position.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of Ameriprise Financial and its affiliates to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others, difficulties potentially delaying or preventing the completion of the Columbia acquisition on the contractual terms among the parties. A list of certain additional factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is detailed under the heading “Forward-Looking Statements” under the heading “Risk Factors” and elsewhere in our annual report on Form 10-K for the year ended December 31, 2008. These forward-looking statements speak only as of today's date, and we undertake no obligation to update publicly or revise them for any reason.
About Ameriprise Financial
Ameriprise Financial, Inc. is a diversified financial services company serving the comprehensive financial planning needs of the mass affluent and affluent.
For more information, visit ameriprise.com.