NEW YORK — Bank of America Corp. agreed to sell the stock and bond mutual-fund business of its Columbia Management unit to Ameriprise Financial Inc. for as much as $1.2 billion.
Once the transaction closes in the spring, Ameriprise's asset-management business will have global assets under management of nearly $400 billion and will become the eighth-largest U.S. manager of long-term mutual funds, it said.
Bank of America said last May it would sell Columbia as part of a plan to raise capital. Bank regulators had told Bank of America to raise $33.9 billion after the government conducted a stress test of the nation's biggest banks.
The bank finished raising the capital as mandated earlier this year, but indicated it would proceed with a sale of Columbia. Bank of America also said in May that it would try to sell its retail bank First Republic, although the bank has yet to announce a buyer for that business.
Columbia's long-term asset-management business, which includes the Columbia mutual funds and other private assets managed by Columbia, had about $165 billion in equity and fixed-income assets under management as of June 30. The stock-fund business, with assets of $93 billion, includes Columbia and Wanger mutual funds. Moreover, 13% of the assets are "subadvised," or managed under contract, by Marsico Funds. The fixed-income fund assets of $72 billion include Columbia mutual funds and individually managed accounts.
Research firm Morningstar Inc. rated 5% of Columbia's stock funds as top-tier, five-star performers, based on historical risk and return; 37% of the stock funds were rated four-star, 46% were rated three-star, and 12% were rated two-star, with none ranked at the bottom, or one-star.
Bank of America will retain Columbia's cash-management business.
The acquisition is expected to begin adding to Ameriprise's earnings and return on equity within a year, excluding integration costs, it said.
Shares of Bank of America recently traded down 36 cents, or 2.1%, at $16.80, while Ameriprise climbed $2.99, or 9.3%, to $35.33.
The total to be paid to Bank of America is expected to be between $900 million and $1.2 billion, based on net asset flows, Bank of America said.
For Ameriprise, the deal represents an opportunity to bolster its asset-management unit and add to its growing retail business. The company has already recruited more than 500 financial advisers from major brokerages in 2009 and has a force of roughly 12,000 advisers.
In an interview with Dow Jones Newswires, Ameriprise Chairman and Chief Executive Jim Cracchiolo said "we think some of the capabilities that Columbia has can actually be brought to our retail clients as well to complement what we already provide."
Cracchiolo touted Ameriprise's ability to enhance its retail distribution with Columbia by adding the accounts of high-net worth clients to its own platform. Ameriprise's brokerage business typically targets clients who have between $100,000 and $1 million in investable assets but, like its larger peers, is also looking to service more of the richest of the rich.
The Columbia transaction is the latest in a series of deals for Ameriprise, which last year acquired H&R Block Inc.'s advisory business and J. & W. Seligman & Co.
Cracchiolo wouldn't rule out further acquisitions for the company, but said "right now this [integration] is where we are focused," Cracchiolo said.
Bank of America affiliates will continue to distribute Columbia products under a five-year agreement, but Cracchiolo stressed that products will be sold that "serve the best interests of clients."
The asset-management industry has been ripe for deals this year. The biggest deal of 2009 was BlackRock Inc.'s $13.5 billion acquisition of Barclay PLC's Global Investors.
In addition, Morgan Stanley is shopping around its Van Kampen fund business. There has been some speculation that money managers such as Invesco Ltd., Nuveen or Franklin Resources Inc. might be among the likely suitors.