Royal Bank of Canada has agreed to buy the U.K. fixed-income money manager BlueBay Asset Management PLC for about $1.54 billion, in its biggest takeover in three years.

Royal Bank is to pay a 29% premium to the London asset manager's closing price on Oct. 15, the companies said Monday in a joint statement.

Royal Bank Chief Executive Officer Gordon Nixon, 53, said last month that the Toronto company was looking to expand its wealth management unit, focusing on the U.S. and Europe.

The BlueBay deal would expand RBC's fixed-income fund business, adding $40 billion in assets.

"The acquisition of BlueBay is well within Royal's stated strategy of expanding its wealth management operations, in the U.K. in particular," Barclays Capital analyst John Aiken said in a note to clients. "We view the acquisition quite favorably."

Royal Bank is paying more for BlueBay than the prices of other announced global deals for investment management firms in the past year.

The for such firms was 26% higher than the average share price in the 20 days before the announcement, according to Bloomberg data.

Royal Bank paid a 40% premium on that measure, according to the Bloomberg data.

The RBC offer "crystallizes people's attention on what these businesses are worth," said Stuart Duncan, an analyst in London for KBC Peel Hunt Ltd. who has a "buy" rating on BlueBay. He values RBC's bid at about 19 times BlueBay's 2011 earnings.

Man Group PLC, the world's biggest publicly traded hedge fund manager, bought GLG Group Inc. this year for 20 times its 2009 profit.

BlueBay, led by co-founder and CEO Hugh Willis, is a fund manager that invests in fixed-income assets including high-yield corporate bonds, emerging-market debt and structured products.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.