Bank of America plans to sell its long-term asset management business, Columbia Management, to Ameriprise Financial for as much as $1.2 billion in an all-cash deal.
As of June 30, Columbia has $165 billion in assets under management, $93 billion of which was in equity and $72 billion in fixed income. The cash business managed by Columbia is not included in the transaction.
Bank of America has been hurt by the recession, posting losses and taking $45 billion in federal bailout money. And it was told in May by regulators to raise more capital to help guard against further losses.
An outside analyst said this deal was very good for both sides. Chip Roame, managing principal of Tiburon Strategic Advisors, said that while BoA is selling off Columbia, it still is a strong player in the asset management space as the owner of Merrill Lynch, and as such, a 50% stakeholder in BlackRock, which owns Barclays Global Investors.
The deal allows Ameriprise to expand significantly into asset management, Roame said, noting that Columbia had many specialists as it was cobbled together from many other firms. Moreover, Ameriprise brings some very good talent to the table. The deal will bring Ameriprise's total assets under management to $400 billion.
The final sale price could be anywhere between $900 million to $1.2 billion depending on the net asset flows in the period leading up to the sale. The deal is expected to be completed by the spring of next year.
BoA CFO Joe Price said the deal strengthens Merrill's capital position while ensuring it continues to offer broad solutions to customers as one of the world's largest financial services firms.
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