Swiss private bank Julius Baer is to buy Bank of America's Merrill Lynch private bank outside the US, paying 860m CHF (£563m) to boost its assets under management by 40 per cent and backing the deal with plans to raise 1.19bn CHF in new capital.
The acquisition, the latest in a string of purchases for deal-hungry 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 SwFr 5.6bn from UBS in 2005.
But the cost of the deal, including the new capital requirements, was taken badly by investors, who sent the shares sharply lower in early trading.
Baer said that while it has SwFr 530m in cash to help fund the deal, it also intends to raise SwFr 750m in a rights issue and in addition will grant Bank of America SwFr 240m worth of shares, making the US bank a 3 per cent shareholder.
It also plans to raise another SwFr 200m in hybrid bonds.
The acquisition will also cost around SwFr 400m in restructuring, integration and retention costs, but will boost its assets under management by 40 per cent to SwFr 251bn and add to earnings from the third full year after closing.
City A.M. Reporter