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Bank of America Corp
Julius Baer Group Ltd. (BAER), the Swiss wealth manager established in 1890, is in talks with Bank of America Corp. (BAC) about acquiring its Merrill Lynch wealth management business outside the U.S.
“Given the early stage of these discussions, the outcome is entirely open,” Zurich-based Baer said today in a statement. Jan Vonder Muehll, a spokesman for bank, declined to elaborate.
The Bank of America wealth unit may fetch about $2 billion, said a person familiar with the matter who asked not to be identified because the talks are private. Sara-Louise Boyes, a London-based spokeswoman for Merrill Lynch, declined to comment on whether any part of the business is for sale.
Baer, a private bank with 178 billion Swiss francs ($187 billion) of assets under management, is seeking acquisitions and building branch networks in emerging markets and Europe as a crackdown on tax evasion pushes customers to repatriate funds from cross-border accounts. Baer, which bought ING Groep NV’s Geneva-based wealth business in 2009, is also seeking purchases to compete with larger rivals UBS AG (UBSN) and Credit Suisse Group AG.
Julius Baer gained 55 centimes, or 1.7 percent, to 33.07 francs by 1:23 p.m. in Swiss trading, giving the company a market value of 6.8 billion francs.
The bank has about 1 billion francs in excess capital and may have to raise new equity to buy the unit, Christian Stark, a Zurich-based analyst at Credit Agricole Cheuvreux SA, wrote in a note to clients today. The transaction may require a maximum capital increase in the range of one new share for two existing shares, he said.
“We expect mergers and acquisitions in the industry to accelerate and Julius Baer should be a prudent participant in this,” Stark said by phone today.
Baer said last month that revenue earned on assets under management fell in the first four months of this year as clients’ appetite for risk remained “subdued.” The private bank’s gross margin, a measure of profitability, was “slightly below” 100 basis points over the period, compared with 105 basis points in 2011. A basis point is one-hundredth of a percentage point.
Bank of America (BAC), based in Charlotte, North Carolina, sought first-round offers for the wealth-management units outside the U.S. in April, a person with direct knowledge of the process said at the time. The bank’s non-U.S. wealth-management units operate in Europe, Asia, the Middle East and Latin America.
About two-thirds of the Merrill Lynch assets for sale are in Asia and Latin America, according to Stark. Adding clients in these areas would support Baer’s emerging-market growth strategy, while incorporating Merrill Lynch’s European business could help the Swiss firm improve cost efficiencies, he said.
Julius Baer’s bid last year to buy a controlling stake in Basel, Switzerland-based Bank Sarasin & Cie. was trumped by an offer from Safra Group. Chief Executive Officer Boris Collardi said April 11 at the firm’s annual shareholder meeting he is still interested in making acquisitions as the Swiss wealth- management industry faces a “consolidation wave.”
Failure to secure the Sarasin deal and disappointing corporate announcements on 2011 earnings and profitability in the four months through April led Baer’s stock to underperform other European banks by 12 percent this year, Robert Murphy, a London-based analyst at HSBC Holdings Plc, said in a June 18 note to clients.
Baer has declined 9.8 percent this year, compared with a 1.4 percent advance in UBS.
Focusing on acquisitions in Switzerland to reduce costs and building partnerships in growth regions would have “a better strategic rationale,” he said.
Baer bought a 30 percent stake in Brazilian wealth manager GPS Investimentos Financeiros e Participacoes SA and acquired Macquarie Group Ltd.’s Asian private-client business last year.
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