A deal that was rumoured yesterday is being consummated today, as Bank of Montreal (TSX:BMO) announced that it is buying the UK’s F&C Asset Management plc for about $1.3 billion in cash.
As suggested yesterday, the deal will see BMO subsidiary, BMO Global Asset Management (Europe) Ltd., pay 120 pence in cash for each F&C share, which represents a premium of approximately 28% to the closing price of F&C shares on January 24. F&C shareholders will also be entitled to receive a normal course dividend of 2p per share.
F&C’s board intends to unanimously recommend that shareholders vote in favour of the acquisition. Subject to F&C shareholder approval, and the satisfaction of regulatory and other conditions, the acquisition will close after May 1.
BMO says that the deal shows that it’s committed to the asset management business. F&C had assets under management of approximately £82 billion (US$136 billion), as of December 31, 2013. The combined AUM of F&C and BMO Global Asset Management, on a pro forma basis, is approximately US$2691 billion (£162 billion).
The bank expects the transaction to be modestly accretive in the first year, excluding one-time costs and the amortization of intangible assets. It also says that the deal diversifies earnings, and it sees “good opportunities” for revenue growth as there is limited product overlap between the firms and complementary distribution. The transaction will cut impact BMO’s Basel III common equity tier 1 ratio by approximately 75 basis points.
“The acquisition demonstrates BMO’s deep commitment to the asset management business,” said Bill Downe, BMO’s CEO. “With an established pedigree in fixed income investment and broad equity and property capabilities across its European platform, F&C advances BMO’s capabilities by adding scope and scale to our well-established portfolio of wealth management businesses.”