Bank of Montreal’s BMO Global Asset Management (Europe) business will purchase London-listed F&C Asset Management in cash.

Bank of Montreal’s BMO Global Asset Management (Europe) business will purchase UK-listed F&C Asset Management in cash, confirming statements yesterday that talks on such a deal was imminent, and a sign of consolidation in the UK fund management space.

BMO Global Asset Management (Europe) is a wholly-owned subsidiary of Bank of Montreal and has around £80 billion ($132.9 billion) of client AuM; the deal will roughly double total AuM.

Under the terms of the acquisition, each scheme shareholder will be entitled to receive 120 pence in cash for each F&C share, valuing F&C's existing issued and to be issued ordinary share capital at approximately £708 million, according to a statement issued by the firms today to the London Stock Exchange.

Separately, F&C today reported group assets under management reached £82.1 billion at the end of December 2013, a fall from £90.1 billion from the end of September; the firm said that despite this drop over just three months, there was “positive momentum” in the consumer and institutional segments. Net inflows for the quarter of £771 million took total net inflows for the year to December 2013 to £1.255 billion, against total net outflows of £1.913 billion in 2012.

“It is encouraging to note the progress being made as our strategy, focused on winning new assets in the Consumer and Institutional business, showed strong momentum in the fourth quarter including the funding of previously announced institutional mandates; that F&C has transformed new business from net outflows of £1.9 billion in 2012 to net inflows of £1.3 billion in 2013 is a validation of the progress being made,” Richard Wilson, chief executive at F&C, said.

Canadians heading East

Today’s net inflow figures for AuM from F&C will be encouraging to its new owners. It also highlights how a number of Canadian banks and financial institutions have made European and other acquisitions in recent years. A number of Canadian banks have made significant international acquisitions in recent years. At the end of 2010, for example, Royal Bank of Canada completed its purchase of BlueBay Asset Management, the UK-listed specialist investment house, in a deal worth £963 million (around $1.5 billion).

Meanwhile, in March 2013 Canada’s TD Bank Group acquired New York-listed Epoch Holding Corporation and its wholly-owned subsidiary Epoch Investment Partners, adding $25.9 billion in assets under management and significantly expanding its North American investment management footprint.

More recently – this month, in fact - Toronto-listed Canadian Imperial Bank of Commerce bought Atlantic Trust Private Wealth Management, the US-based private wealth management firm, from Invesco for $210 million. The deal was first announced in April 2013.

In today’s statement, it said that because of BMO's “strong capital position,” no common equity offering will be required to pay for the takeover. The impact of the acquisition on BMO's Basel III Common Equity Tier 1 ratio is expected to be approximately 75 basis points.

“The acquisition will further diversify BMO's earnings by adding fee-based income with good opportunities for revenue growth. Cost savings from the acquisition are expected to be modest,” it said.

The statement said the takeover will modestly accretive to BMO's earnings per share in the first year, excluding one-time costs and the amortization of intangible assets.

The directors of F&C, who have been so advised by JP Morgan Cazenove, “consider the terms of the acquisition to be fair and reasonable,” the statement said; they have unanimously recommended that shareholders accept the offer.

“BMO believes that the acquisition is an excellent strategic, financial and cultural fit and an attractive transaction for both companies and their key stakeholders. It is expected that a common client focus, enhanced global and diverse product offering and a focus on delivering strong investment returns will benefit both BMO and F&C clients,” it said.

“By doubling AuM, the acquisition will position BMO Global Asset Management as a globally significant money manager, adding scale, resources and capabilities to its investment platform, while providing attractive cross-sell potential into wealth markets in the UK and the rest of Europe,” it added.

BMO Global Asset Management currently operates multi-disciplined investment hubs in Canada and the US, in addition to a number of specialized equity boutiques in the UK and elsewhere, with total AuM of about £80 billion as at December 31, 2013.