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Ameriprise to acquire most of BofA’s Columbia for $1B

Ameriprise will spend $1 billion to acquire the majority of Columbia Management, the asset management business of Bank of America, in an all cash deal, the companies have revealed.

Ameriprise Financial Inc. will spend $1 billion to acquire the bulk of Columbia Management, Bank of America’s asset management business, in an all-cash deal, the companies have revealed.

Ameriprise will be purchasing Columbia Management Group LLC’s $93 billion in equity assets and $72 billion in fixed-income assets, but not Columbia’s cash management business.

Ameriprise has been angling to acquire these Columbia businesses for months and first appeared to have the inside track on the acquisition in August.

At that time, the two other most interested potential buyers — Madison Dearborn Partners (for its Nuveen Investments LLC subsidiary) and OppenheimerFunds Inc. — stepped away from the bidding table, as InvestmentNews reported, leaving Ameriprise as the clear front-runner.

The final price of the deal will ultimately be based on asset flows and investor consents. While $1 billion is the current estimated price, Ameriprise has agreed to pay between $900 million and $1.2 billion in cash for the Columbia asset management business.

Ted Truscott, Ameriprise president, U.S. asset management, annuities, and CIO, will serve as the head of the companies once they are combined. Michael Jones, president of Columbia Management, will be the firm’s president, and Colin Moore, who is currently the CIO at Columbia, will stay in this position at the combined firm when the deal closes.

For Ameriprise, this deal comes just three months after the company completed a $900 million stock offering that loaded the company’s coffers to acquire another brokerage or asset management firm — namely Columbia.

“I think Ameriprise is looking at this as clearly an opportunity to add sales and beef up capabilities in certain areas,” said Howard Schneider, president of Practical Perspectives LLC, a consulting firm.

“Ameriprise has always had a strong proprietary orientation towards distribution, and one of the things they are trying to do is get greater third-party distribution,” he added. “This could help them with that.”

Charlotte, North Carolina-based Bank of America Corp. has been among the banks hardest hit by the recession and mounting loan losses. The bank has received $45 billion in government bailout money over the past year. It was also required by the government in May to raise an additional $33.9 billion to help protect against potential future losses should the economy struggle to recover.

At that time, analysts predicted Bank of America could shed Columbia Management as part of its capital-raising efforts. However, the bank ended up raising the necessary money through other asset sales, stock offers and debt conversions.

“The acquisition of Merrill Lynch [& Co. Inc.] provided an opportunity to look at our entire portfolio of businesses with an eye toward strengthening our capital position while ensuring that we continue to offer the broadest possible solutions to our customers and clients as one of the world’s leading financial services firms,” BofA chief financial officer Joe Price said in a statement. “We’re pleased to reach an agreement with Ameriprise that is consistent with that goal.”

Bank of America said it is still considering what to do with the cash investments and short-term asset management businesses currently run by Columbia.

Ameriprise said the acquisition will boost earnings within one year, excluding integration costs. The firm said the acquisition will generate between $130 million and $150 million in annual cost savings, with about half of the savings being realized in the first year after the purchase is completed.
Combined with its current operations, Ameriprise will manage about $400 billion in assets after the deal is completed, likely next spring.

The deal is expected to close in the spring of 2010.

The Associated Press contributed to this article.