Julius Baer will buy the Swiss private banking assets of ING for 520 million Swiss francs ($507 million), the European wealth management industry's biggest deal since the financial crisis began.
Baer is paying about 2.3 percent of assets under management (AUM) for the business excluding surplus capital, and about 3 percent including the surplus, roughly in line with expected valuations. Before the financial crisis, similar deals attracted prices above 5 percent of AUM.
"The Baer/ING deal was already expected. Strategically it makes sense," a Zurich-based trader said. "They are paying 3 percent of assets, which is fairly attractive."
Baer shares rose 2.5 percent to 40.12 francs at the open. Shares in Dutch financial services group ING rose 0.8 percent to 11.765 euros.
Julius Baer is paying cash and expects the deal to generate 35 million francs in cost savings and to add to earnings from 2011. The ING unit has about 15 billion francs in assets under management, including surplus capital of 170 million francs.
Baer recently built its war chest by listing its U.S. asset management arm Artio. Last week it separated off asset management arm GAM Holdings in a bid to be a more pure-play wealth manager and free itself up for dealmaking.
Baer Chief Executive Boris Collardi had told the Reuters Global Wealth Management Summit on Monday he was "hopeful" on the outcome of the ING sale.
He also said he had turned down five to 10 deals over the last year, indicating a cautious attitude to the assets available.
Ranked after UBS and Credit Suisse as the third biggest wealth manager in Switzerland, Baer is also seeking to build Asia as a second major market.
With the deal, expected to close early in 2010, Julius Baer said it would have 160 billion Swiss francs under management.
ASIA SALE WEEKS AWAY
ING said the deal would deliver 150 million euros of profit and free up 250 million euros of capital. A source close to the company's sale programme has said it expects the total package of private banking assets to be sold, including its Asian wealth management operations, to fetch nearly $2 billion.
The sale of the Swiss assets came more than a month after most bids for the private banking units were made on Sept. 3. The sale of the Asian assets could take more time because of regulatory issues, sources said.
"The Asian sale is a few weeks away," said one of the sources, adding regulatory approvals from the Monetary Authority of Singapore, the city-state's central bank, could take time.
HSBC is seen as a front-runner for these assets, while Singapore's DBS Group has also bid for the Asian assets, sources have said.
"This signals that the consolidation phase has just begun in the industry, and we are of the opinion that going forward we will see many such deals coming through in the Asia Pacific market," said Ravi Nawal, a senior analyst for wealth management at consultant Celent.
HSBC's CEO of global private banking Chris Meares told the Reuters Wealth Management Summit the bank had looked at ING assets and described the proposed sale by the Dutch bank as a rare opportunity in Asia.
The sale process of the private banking units is part of ING's restructuring drive to sell 6-8 billion euros in assets and exit 10 of the 48 countries where it does business.
ING was advised on the deal by J.P. Morgan, while UBS advised Julius Baer.