Canadian Imperial Bank of Commerce, Canada's fifth-biggest bank, agreed to buy Atlantic Trust Private Wealth Management from Invesco Ltd. for $210 million to expand its wealth-management business in the U.S.
"Atlantic Trust offers a very attractive entry point for CIBC into the U.S. private wealth-management segment," Victor Dodig, group head of wealth management for the Toronto-based bank, said today in an interview. "This is a growth platform."
Atlantic Trust manages about $20 billion in assets on behalf of clients through 12 U.S. cities, CIBC said in a statement. The firm provides advisory services to wealthy individuals, families, foundations and endowments and employs about 235 people.
CIBC has sought to expand its wealth-management unit by acquisitions, including its takeover of MFS McLean Budden's private wealth business in August and its $848 million purchase of a 41 percent stake in American Century Investments in 2011. The lender has said it wants wealth management to represent 15 percent of the company's earnings, up from about 9 percent in 2012.
"CIBC is now well-placed to continue growing in the two important wealth segments that we're most interested in: asset management and private wealth management," Dodig said.
CIBC seeks "gradual acquisitions of moderate size" to expand its wealth management business, Chief Executive Officer Gerald McCaughey said at a Jan. 8 banking conference. Dodig said he wants to expand the unit internally while also watching for additional takeovers.
"We want to keep our radar on for opportunities that would fit, that would make sense from a shareholder standpoint and would make a cultural fit over the medium term with the organization, to get more scale with the business," Dodig said.
The takeover is expected to close in the second half of the year and will add to earnings in fiscal 2014, CIBC said. The transaction may reduce the bank's Basel III Common Equity Tier 1 ratio by about 20 basis points as at Jan. 31.
"Over time this is going to make an important contribution because the U.S. is an attractive market: it accounts for 40 percent of high-net-worth households globally, and that segment is growing at a 50 percent higher rate than the rest of the market in the U.S.," Dodig said.
The sale will reduce Invesco's annual earnings by about 5 cents a share, Chief Financial Officer Loren Starr said today in a conference call with analysts. The company intends to use the money raised to repurchase its own stock, offsetting the dilution of earnings by 3 cents a share, Starr said.
The sale allows for "improved allocation of capital and resources, and for growth in our core investment business," Starr said.
Atlanta-based Invesco managed $687.7 billion in assets as of Dec. 31.
