Amsouth Bancorp, looking to get out of the third-party marketing business, is considering selling a business unit that provides brokerage services to more than 450 small-bank clients, according to sources familiar with the situation.
Though no deal appears imminent, Minneapolis insurer ReliaStar Financial Corp. stands out as a likely bidder for the unit, IFC Holdings Inc., according to the sources.
IFC and ReliaStar declined to comment, citing company policy. But Tampa-based IFC would be a good fit for ReliaStar, observers said. Repeated telephone calls to Birmingham, Ala.-based Amsouth seeking comment were not returned.
ReliaStar, the eighth-largest publicly held insurance company in the United States, has pursued a steady stream of small but strategic acquisitions in recent months in an effort to reach into other areas of financial services.
ReliaStar already owns third-party marketer PrimeVest Financial Services of St. Cloud, Minn. In February, PrimeVest bought Bisys Brokerage, the third-party marketing arm of Bisys Group of Little Falls, N.J., adding about 20 banking clients to PrimeVest's 600.
In February, ReliaStar announced plans to buy Lexington Global Asset Managers, a Saddle Brook, N.J.-based money management company, for $47.5 million. The deal, slated to close July 7, would give it access to international equity management. In October, ReliaStar bought Phoenix-based fund company Pilgrim Capital Group for $258 million.
Last year the insurer bought Fairfield, N.J.-based Financial Northeastern Cos., which comprises a broker-dealer and one of the nation's largest certificate of deposit brokers.
"It's clear that they're trying to fit into an overall financial services industry and they don't have the size and scale they need," said Jeffrey Hopson, an equities analyst at A.G. Edwards in St. Louis. "On the distribution side, they're not nearly at scale, so you would expect them to continue to build scale on the distribution side."
ReliaStar has said it would probably combine with another financial services company, probably a bank. Bulking up through acquisition is probably a short-term bid to stay independent, according to Mr. Hopson. However, becoming a bigger player could have the opposite effect and make ReliaStar a more attractive acquisition target, he said.
Amsouth has owned IFC since its October acquisition of IFC's former parent, First American Corp. of Nashville.
IFC operates two units, Invest Financial Corp. and its sister company Investment Centers of America, and it would certainly add distribution outlets for ReliaStar's insurance and annuity products, said Richard Ayotte, chief executive officer of American Brokerage Consultants.
IFC would also be "highly complementary" to PrimeVest's business, Mr. Ayotte said. PrimeVest provides discount brokerage services to most of its bank clients, he said, whereas IFC is stronger on the full-service side. Also, PrimeVest clears its own trades; IFC does not.
Mr. Ayotte surmised that Amsouth may want to shed the third-party marketer because it is not a core business for the company. It is telling, he said, that upon acquiring First American, Amsouth pulled that bank's brokerage customers - who had been served by IFC - into Amsouth's own brokerage arm.
"Over the past few years, there has been a trend of banks' & getting out of credit cards" and other noncore businesses, said Kenneth Kehrer, a principal of Kenneth Kehrer Associates in Princeton, N.J. Amsouth "may feel they want to focus on selling investments to their customers," he said.
Mr. Kehrer, who helps match third-party marketing firms with buyers, estimated that IFC would sell for $120 million to $280 million, based on estimated revenues.
Mr. Ayotte of American Brokerage Consultants said the prices of such acquisitions are often based on the number of bank relationships brought to the table, as opposed to earnings.
Such deals usually include an earn-out, or supplementary payment, that is based on how many bank clients stay with the acquired third-party marketer, he said.
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