Julius Baer is expected to purchase the wealth management arm of the Merril Lynch banking brand. The purchase will include all operations that take place outside of the US borders in a new deal that will boost the assets of the Swiss private bank by almost 50% and increase its exposure to some of the new wealth that is coming from developing markets outside of the US.
The Swiss based bank has not been secret about its intent to expand over the past few years and the deal is easily its largest since it purchased four wealth management businesses in 2005 from UBS. Julius Baer plans to pay $840m for the new unit depending on how many assets will be transferred at the end.
They will also need to pay an additional few million in just regulatory capital in order to support the new weighted assets and the associated risks that they take on with them. It is expected that another $400 million will come from retention and restructuring costs that are associated with the deals.
In order to finance the deal Julius Baer is going to deploy some capital that was previously put aside for a share buyback programme they were considering. They will also use about $100m more in new hybrid capital and the rest will come from a rights issue.
Merrill will also be given about $100m in shares which in turn will give it a 3% stake in the new larger Julius Baer. Chief executive Boris Collardi stated that the deal will help Julius Baer get the scale they need to be a major player in the global wealth management business.