BUSINESS

CIBC to acquire McLean Budden's private wealth management business

08/07/2012 05:36 EDT | Updated 10/07/2012 05:12 EDT
TORONTO - After "a very, very long time" without a major acquisition in its private wealth management segment, CIBC said Tuesday it was worth the wait for MFS McLean Budden's $1.4-billion portfolio of high net worth clients.

"It's got to be the right opportunity and this is one that fits very well strategically for us," said Gary Whitfield, managing director and head of the bank's private wealth management business.

The private client business of the Sun Life Financial (TSX:SLF) subsidiary manages assets for high net worth individuals, defined as clients with $1 million or more in investable assets.

The portfolio includes individuals and families, endowments and foundations, as well as investment consultants who act as intermediaries between the bank and the clients — an area that Whitfield said CIBC (TSX:CM) has not focused on.

"The consultants are something that MFS McLean Budden has done extremely well, an area that we haven't done well in," he said.

Financial terms of the deal, slated to close in the fourth quarter, were not immediately disclosed. But Whitfield said it is one that helps position CIBC as one of Canada's fastest-growing investment managers.

"This is definitely an attractive area for us the growth rate in the high net worth market far exceeds the rest of the market place," Whitfield said.

"Obviously, the size of the relationships makes each one very meaningful."

CIBC acquired a 41 per cent interest in U.S. asset manager American Century Investments for $848 million in 2011, but has been sitting on the sidelines for the most part as some of the other Canadian banks have scooped up smaller wealth management players and consolidated the industry.

Independent firms have faced both pressures over their fees and competition from big banks who have a wider reach because they can sell mutual funds through their branches.

Desjardins Securities analyst Michael Goldberg said the move was positive for CIBC, though it was a "relatively small tuck-in transaction" as it will have a minimal impact on CIBC's earnings.

CIBC's wealth management operations account for less than 10 per cent of its overall business, he noted.

"On balance, this appears to be a low-risk investment that should help CIBC’s wealth business. It also diversifies CIBC’s earnings sources by line of business--we like this last attribute as well. Bottom line, we view this investment as a modest positive development for CIBC," Goldberg said.

Sun Life, which acquired the remaining 32.4 per cent in McLean Budden that it did not already hold last year, approached CIBC to discuss selling the asset, Whitfield said.

For its part, Sun Life said the private client business didn't fit with the rest of its wealth management operations.

"Their model of working directly with individuals and families and smaller institutional clients was inconsistent with MFS's business model," MFS spokesman Dan Flaherty said in a telephone interview from Boston.

Flaherty added that the company worked carefully to find a buyer like CIBC's private wealth management business.

"CIBC also had the capability to quickly transition the group and its clients to its platform and, again, that was an important factor that we weighed when considering the transaction."

CIBC, through its retail and business banking, wealth management and wholesale banking businesses, provides a full range of financial products and services to almost 11 million individual, small business, commercial, corporate and institutional clients in Canada and around the world.

McLean Budden has offices in Toronto, Montreal and Vancouver and manages $32 billion in assets for mutual fund clients and others in addition to its private wealth management business that was sold Tuesday.

CIBC shares rose 57 cents to close at $73.81 Tuesday on the Toronto Stock Exchange.