Fifth Third Bancorp, saying it intends to expand in investment management, announced a deal Tuesday to buy an Indianapolis firm that specializes in equities.
The purchase of Heartland Asset Management, which has $900 million under management, would be the first of an asset manager by the Cincinnati-based banking company. Fifth Third has $13 billion of assets under management and $110 billion under administration.
The price of the stock-swap transaction was not disclosed, but observers estimated it at around $18 million, or around 2% of assets under management. The acquisition is expected to close in November.
Two-thirds of Heartland clients are institutions and the remainder are wealthy people, said Michael K. Keating, an executive vice president at Fifth Third. Heartland would give Fifth Third a lift in Indiana, where it has $1.1 billion of assets under administration.
Mr. Keating added that Fifth Third is making a concerted effort to increase market share in the states where it has banking operations: Florida, Indiana, Kentucky, and Ohio.
Besides the immediate gain in managed assets, Fifth Third stands to gain more banking customers, he said. "We have an opportunity to cross-sell private banking services, trust and estate services, and retirement programs."
The principals of Heartland-Barry F. Ebert, Robert D. Markley, and Thomas F. Maurath-would remain with the company, which would operate under the Heartland name. Fifth Third Investment Advisers will continue to manage the 13 proprietary Fountain Square Funds, which have $2.9 billion of assets.
Heartland was attracted to Fifth Third's "entrepreneurial spirit," said Mr. Markley, who added that the deal would greatly enhance his firm's distribution.
The principals declined to confirm if the bank paid full price. Current pricing for investment advisory firms is on the order of 1.5% to 2% of managed assets, according to investment bankers.
"The bank is not going to overpay for an acquisition simply because the market is pricing companies at a given level," said Peter L. Bain, a managing director of Berkshire Capital Corp., which advised the bank on the transaction.
