BMO boosts wealth management

The Bank of Montreal (TSX:BMO) is making plans to double its wealth management business with an acquisition across the pond valued at $1.3 billion. The Canadian bank made official Tuesday a friendly deal to buy U.K.-based F&C Asset Management PLC.

The Bank of Montreal (TSX:BMO) is making plans to double its wealth management business with an acquisition across the pond valued at $1.3 billion.

The Canadian bank made official Tuesday a friendly deal to buy U.K.-based F&C Asset Management PLC.

BMO Global Asset Management will roughly double its assets under management to US$269 billion with the addition of F&C.

In a conference call with analysts, BMO chief executive Bill Downe called the purchase a “logical” step for the bank, which has focused primarily on Canada and the U.S. Midwest.

“Adding a larger fixed income and European component really helps to round out what is a broad global offering,” Downe said.

“I think it’s going to be attractive to both our investor base in the United States and in Canada but… (also) in Asia, Europe and the Middle East.”

F&C disclosed Monday that it was in advanced discussions with BMO about a deal, which still requires shareholder and other approvals. It is expected to close after May 1.

Downe said the timing was right, as the bank foresees further growth in the European market.

“We can see the emergence of possible economic growth in Europe sooner, perhaps than some had expected,” he said.

“I don’t think it’s going to be rapid but I think this is an opportune time from a valuation perspective and hopefully, as we close (the deal) and integrate (F&C), we’ll start to see some more economic momentum.”

Bank of Montreal is offering 120 British pence, or about C$2.21 at current exchange rates, for each share of F&C — about 28 per cent above Friday’s closing price.

F&C shares closed at 123.5 pence on the London Stock Exchange.

“F&C’s board of directors believes the offer represents an attractive valuation for F&C shareholders and a positive outcome for employees and clients,” F&C chairman Kieran Poynter said in a joint statement with BMO.

The bank expects only “modest” savings in making the acquisition since F&C has already done a lot to reduce costs in recent years.

In a note, CIBC World Markets analyst Robert Sedran said the acquisition should not come as much of a surprise and reflects a “continuation” of BMO’s strategy to further focus on wealth management. In the past, it has acquired other firms including Pyrfod International and Lloyd George Management.

“The good news from the risk perspective is that the deal is hardly transformational and so the overall risk profile of the bank is little changed,” he wrote.

Nevertheless, Sedran noted F&C has been dealing with higher costs and lower assets under management, two issues that BMO expects to have reached their “inflection point.”

He said BMO is betting F&C can grow its retail and institutional investment arm as it deals with declining revenue from so-called legacy relationships.

The British firm reported that its assets fell in the fourth quarter to 82 billion pounds from approximately 90 billion pounds after one of its legacy investors pulled 10 billion pounds. Nearly 60 per cent of F&C’s assets are from legacy relationships with four pension funds.

Meanwhile, Desjardins analyst Michael Goldberg called the deal as “modestly positive” for BMO.

Goldberg said the purchase could add an estimated 10 cents to BMO’s annualized earnings per share, which Desjardins projects to be $6.50 for fiscal 2014.

“F&C has attractive distribution capabilities in the U.K. and Europe, which complement BMO’s distribution in the U.S. and Canada, creating cross-sell and revenue potential in the future,” he said in the note.

“We note that F&C also complements BMO’s agnostic multi-strategy approach aimed at having a broad product shelf for investors to choose from.”

F&C Management traces its history to the launch of the Foreign and Colonial Investment Trust in 1868 and is one of the world’s oldest wealth management firms.

BMO shares closed up eight cents at C$70.54 on the Toronto Stock Exchange.

Just Posted

Red Deerians shop for exotic plants at spring plant sale

Exotic plants are popular at the Red Deer & District Garden Club’s… Continue reading

Central Albertans come together to end MS

Red Deer’s Bre Fitzpatrick has MS. The medication the 34-year-old is on… Continue reading

Wildfire crews watching for dangerous wind shift in High Level, Alta.

HIGH LEVEL, Alta. — Crews battling an enormous wildfire just outside the… Continue reading

New poll suggests one-third don’t want politicians to wear religious symbols

OTTAWA — While most Canadians firmly back the Charter of Rights and… Continue reading

Red Deer stamp-collecting event a hit, local club expected to start in fall

Postage stamp-loving Red Deerians can expect to have a place to gather… Continue reading

WATCH: Cars, airplanes, motorcyles on display at Red Deer Airport

Cars, motorcycle and airplane enthusiasts united at the Red Deer Airport Sunday… Continue reading

Cast your votes for the Best of Red Deer

Nominations for the Best of Red Deer Readers’ Choice Awards are officially… Continue reading

Bid to get D-Day beaches added to list of UN World Heritage Sites in limbo

OTTAWA — The beaches of Normandy, where the Allies stormed ashore to… Continue reading

Could this 20-year-old Montreal polyglot be Canada’s most multilingual student?

MONTREAL — Georges Awaad answers the phone with a polite “Hello,” but… Continue reading

Feds lay out proposed new rules for voice, video recorders in locomotives

OTTAWA — The federal Liberals have laid out their proposal for rules… Continue reading

Trump’s trophy day of sumo, golf and cheeseburgers in Japan

TOKYO — President Donald Trump presented a special U.S.-made trophy to the… Continue reading

Two dead, one seriously injured, following explosion in Calgary home’s garage

CALGARY — Police in Calgary say they believe a house fire where… Continue reading

Raptors fans spill onto the streets ahead of potentially historic game

Cars honked, exhilarated fans chanted and long lines formed outside bars and… Continue reading

Most Read