City National Corp. will acquire a majority stake in Lee Munder Capital Group and combine it with another affiliate, Independence Investments, according to a news release.
The combination will make Lee Munder the primary institutional asset management affiliate of City National, the release said.
Terms weren't disclosed.
City National is acquiring private equity firm Castanea Partners' stake in Lee Munder as well as a portion of founder Lee Paul Munder's majority stake, said Kenneth Swan, Lee Munder president.
Mr. Munder will remain as chairman of the firm, said Mr. Swan, who will serve as CEO of the combined firm.
The merger of Lee Munder and Independence will occur after the deal is closed sometime in the third quarter, resulting in an institutional money management firm with more than $4 billion in equity assets under management, according to the release.
Mr. Swan and Lee Munder CIO Jeffrey Davis will oversee investment decisions and risk management at the combined firm. Independence CIO Jay Leu, will be a portfolio manager for the combined company.
In a telephone interview, Mr. Swan called the deal a nice win for his firm, with a new owner that can provide liquidity for the future and a path for redistributing equity among the firm's investment professionals.
The planned merger follows a rough year for Independence Investments, where assets under management plunged 87% since the end of 2007, to $845 million as of March 31, according to eVestmentAlliance.
The money manager had $3.2 billion in client defections in 2008, adding to broader market-related declines.
Despite that tough stretch, Mr. Swan said Independence still has a pretty substantial institutional client base, noting that with Mr. Davis as CIO, there are areas we can help them rebuild.
Berkshire Capital Securities advised both City National and Lee Munder.
Jon Stern, a managing director with Berkshire, called the Lee Munder-Independence combination indicative of other transactions likely to take place this year, with firms coming together to offer a broader range of products with an efficient infrastructure.
City National spokesman Christopher J. Carey wasn't immediately available for comment.