RBC to acquire BlueBay in £963million deal
19 Oct 2010
Royal Bank of Canada (RBC), the largest financial institution in Canada, yesterday said that it has entered into a deal to buy British fund manager BlueBay Asset Management for $1.5 billion (£963 million) - a move that will catapult it to among 10 global wealth manager.
Founded in 2001, BlueBay is one of the largest independent managers of fixed income credit funds and products in Europe, with assets under management of $40 billion.
"Our board is unanimously recommending this combination with RBC because of the clear benefits it affords the firm's shareholders, clients and employees," said Hans-Jörg Rudloff, chairman of BlueBay.
Shares in London-based BlueBay Asset Management shot up 30-per cent following the London-based investment fund's announcement that it had agreed to an acquisition by the Royal Bank of Canada.
Under the agreement, BlueBay shareholders would receive 485p in cash for every BlueBay share which estimates the company's worth at £963million.
Investors would also receive the proposed dividend of 7.5p per share for of the past financial year. This would bring the deal's value to 492.5p.
The offer values the company's shares at a 29-per cent premium to Friday's closing price.
"This acquisition will further Strategy to leverage our position as a top 10 global wealth manager, and continue to expand our asset management solutions for the benefit of our clients around the world," George Lewis, group head of RBC Wealth Management, said in a statement.
BlueBay debuted the stock market in 2006, after its shares were valued at 300p. The group which specialised in fixed income made millions from its special situations unit, jointly-led by Gina Germano who is no longer with the firm. Among Germano's lucrative investments were Drax, UK's largest power station, whose debt BlueBay acquired cheap. A rally in electricity prices following the purchase saw creditors who had swapped their debt for equity reap hefty profits.
According to analysts BlueBay has recently acted more typical asset manager and less as a hedge fund.
A former manager of BlueBay's emerging markets fund was slapped a fine of £140,000 in February and banned from the industry for misleading the UK's Financial Services Authority regarding of the assets he managed.
The RBC offer has received full support from BlueBay's directors, who have given irrevocable undertakings to vote their 20.5 per cent shareholding for the acquisition.
RBC is focused on global wealth management and capital markets and is among the top 10 money mangers in the world by assets under management.
According to Lewis, the segment offered the advantage of leveraging relatively low capital investments into a strong contribution to earnings. Earlier, RBC had said it had earmarked as much as Canadian $4 billion-6 billion for wealth management acquisitions. The company has been increasingly looking to expand into emerging markets, including the Middle East.
RBC said one of the key advantages of the deal was the combination of its global distribution network with BlueBay's expertise in tailoring fixed- income investment products having unusually high returns.
BlueBay said separately that it held $40 billion of assets under management as of 30 September.
Based in London, with offices in the US and Japan, BlueBay provides investment management services to institutions and high net worth individuals. BlueBay offers three distinct asset management styles to its investors - long-only funds, long/short funds and structured products. BlueBay also manages segregated mandates on behalf of large institutional investors.
The 220 employees of BlueBay will become part of RBC's Global Asset Management business and collaborate with their new partners in RBC Wealth Management, RBC's global segment for wealth and asset management solutions, said RBC in a statement.
RBC Global Asset Management comprises of RBC Asset Management Inc, Phillips, Hager & North Investment Management Ltd and RBC Global Asset Management (U.S.) Inc.
