(September 28 – 09:30 ET) – Royal Bank of Canada is buying one of Wall Street’s last unconsolidated brokerages, Minneapolis-based Dain Rauscher Corp., for US$1.46 billion in cash.
RBC will pay US$95 a share in cash for the firm, which closed yesterday at US$79.875, putting a 19% premium on the stock. Dain Rauscher will be rolled into RBC to create RBC Dain Rauscher Wessels, boosting RBC’s U.S. operations in full-service retail brokerage and investment banking. The merger is expected to close by the end of the year, subject to regulatory and shareholder approval.
Dain Rauscher brings about 1,200 retail brokers to RBC, mostly in the western United States. It has 90 branches in 27 states serving 250,000 clients with assets under administration of about US$69 billion. It also provides correspondent clearing services for over 2,000 correspondent brokers.
Including this acquisition, RBC will have a North American wealth management sales force of nearly 2,600 brokers and a network of 215 branches. “Dain Rauscher provides a solid wealth management presence in the U.S., a recognized brand name and a proven management team,” said Reay Mackay, vice chairman, RBC and head of its global wealth management business, Royal Investment Services. “Its retail brokerage operation is a critical step in building a strong wealth management platform, a key element of our global strategy.”
Irving Weiser, chairman, president and CEO of Dain Rauscher becomes chairman and CEO of the new firm and will join RBC’s management committee. He will also run the bank’s wealth management business in the U.S., and Dain Rauscher’s fixed income business as well as all staff functions.
The equity capital markets business will operate under RBC’s corporate and investment banking unit. Peter Grant, currently head of Dain Rauscher’s equity capital markets business, will become president and chief operating officer of the equity capital markets division, and he will be responsible for the U.S. and Europe.
The firm brings 3,800 employees and 1999 revenues of more than US$940 million.
RBC adds Dain Rauscher to a U.S. business that includes investment banking operations in Boston, Chicago, Houston and New York; discount brokerage operations in New York; Internet banking in Atlanta; mortgage origination in Chicago and private banking units in New York and Miami. It is also in the midst of acquiring the insurance businesses of The Liberty Corp. of Greenville, S.C.
“This transaction is consistent with our continuing strategy of targeted acquisitions in the U.S. market,” said John Cleghorn, chairman and CEO of RBC. Weiser praised the merger as “an excellent fit both strategically and culturally.”
-IE Staff