Source: The Canadian Press
Royal Bank of Canada has made a bid to acquire British-based BlueBay Asset Management for more than $1.5 billion, the latest step in RBC’s strategy of being one of the world’s top wealth managers.
George Lewis, group head of RBC Wealth Management, told analysts on Monday, that Canada’s largest bank believes the wealth management segment will continue to grow faster than other parts of the global financial services industry.
“This acquisition will further leverage our position as a Top 10 global wealth manager by broadening our product offering, expanding our footprint in international markets and improving our distribution capabilities which will ensure that we continue to deliver the best asset management solutions to our clients,” Lewis said in a conference call.
BlueBay is one of Europe’s largest independent managers of bond funds and products, with US$40 billion in assets under management.
The agreement comes after Royal Bank (TSX:RY) announced last month it would expand its global wealth management business.
Other Canadian banks and insurance companies are also eyeing their wealth management businesses abroad.
China’s burgeoning middle class, for example, has attracted Bank of Montreal (TSX:BMO), Scotiabank (TSX:BNS), CIBC (TSX:CM) and Manulife Financial (TSX:MFC) as well as Royal Bank.
Under the terms of the acquisition, BlueBay shareholders will be entitled to 485 pence in cash for each BlueBay share, which is a premium of 29 per cent over the last closing price of BlueBay shares of 375.70 pence last Friday.
The transaction will be funded using RBC’s existing cash resources, and is not expected to have a material impact on RBC’s earnings per share in the near term.
It is expected that the $1.56 billion purchase will be implemented by way of a court-approved arrangement and that documents will be sent to BlueBay shareholders in November.
Lewis told analysts that RBC’s strategy to acquire more international wealth management assets is hinged on the belief that demographics are leaning more towards retirement savings and financial plans in developed markets, while emerging markets are also showing “significant growth” in wealthy individuals.
RBC Global Asset Management chief executive John Montalbano said one of the attractive factors of the agreement is that it fills a gap in the bank’s international business.
“There is virtually no overlap between Blue Bay’s fixed income and alternative capabilities and our own existing fixed income skills,” Montalbano said.
The agreement will give RBC “potential cross-sell opportunities not only in North America but abroad,” he added.
The board of BlueBay has unanimously recommended that its shareholders vote in favour of the acquisition, which is expected to close by the end of December.
Barclays Capital analyst John Aiken said the transaction is favourable for Royal Bank, and fits within its previously stated expansion strategy.
“While the price paid is far from inexpensive, we note that BlueBay has increased its assets under management by over 60 per cent from June 30, 2009,” he wrote in a note.
“We see the potential for synergies for Royal based not only on the geographic reach of BlueBay, but the integration of operations and investment mandates between the two groups.”
Royal Bank shares were ahead 37 cents to $55.92 on the Toronto Stock Exchange late Monday morning.
RBC to acquire Britain’s BlueBay Asset Management for about $1.5 billion
Fund manager an `ideal fit’ with RBC’s growing asset management business, Lewis says
- By: David Friend
- October 18, 2010 October 18, 2010
- 11:10