Ameriprise Financial will purchase Columbia Management’s long-term equity and bond asset management business from Bank of America for between $900 million and $1.2 billion in cash, Ameriprise and Bank of America announced.
The acquisition, expected to close in spring 2010, will bring $93 billion in equity assets and $72 billion in fixed-income assets to Ameriprise, lifting its total assets under management to almost $400 billion. The deal will make Ameriprise the eighth-largest mutual fund manager in the U.S. by AUM, according to an Ameriprise news release.
The deal includes a five-year strategic distribution agreement with Bank of America-affiliated distributors, including U.S. Trust.
Ted Truscott, Ameriprise president, U.S. asset management, annuities, and CIO, will lead the combined entity as head of U.S. asset management. Michael A. Jones, president of Columbia Management, will become president, while Colin Moore, Columbia’s CIO, will hold the same title at the combined firm, Ameriprise said in the release.
Both Ameriprise and BofA said the final price tag will be determined by net asset flows at Columbia Management up to the time the agreement closes.
The transaction doesn’t include Columbia’s cash business, which had $166 billion in client assets as of June 30. There had been speculation that BlackRock, Bank of America’s giant money management affiliate as a result of its purchase last year of Merrill Lynch, would end up subadvising those assets, but Bank of America in its release on the Columbia deal said it “continues to consider alternatives for the cash investments.”
In a conference call to analysts, reporters and others, Jim Cracchiolo, chairman and CEO of Ameriprise, said the addition of Columbia’s long-term business will let Ameriprise grow its asset management business organically. While Ameriprise may still be open to “incremental” acquisitions, if they make sense for shareholders, the company’s focus will be on the task of integration, he said.
By 2011, parent company Ameriprise Financial will be looking to get up to 25% of its earnings from asset management.
Mr. Truscott said in a telephone interview that Ameriprise will be focused on serving institutional clients as well as expanding its mutual fund business.
Chris Keating, head of Ameriprise’s institutional business, and Jeff Peters, who leads Columbia’s institutional efforts, “have done tremendous jobs,” although uncertainty surrounding the acquisition has been an obstacle this year to garnering new mandates, Mr. Truscott said. With that uncertainty removed, the combined firm should see a pickup in institutional momentum, he said.
On the institutional side, Ameriprise has done well in fixed income, including high-yield bonds, investment-grade credit and global bonds, while Columbia has strong offerings in large-cap growth, value and core equities, as well as small-cap and midcap growth equities, Mr. Truscott said.
On a pro-forma basis, the combined institutional assets of RiverSource, which is Amerprise’s asset management arm, and Columbia came to roughly $87 billion as of June 30,, Mr. Truscott said. Columbia accounted for $35 billion of that total, with RiverSource accounting for $52 billion. However, well under half of RiverSource’s institutional assets came from third-party clients, with the bulk of the remainder accounted for by the parent company’s insurance assets, he said.