13 August 2012

Julius Baer to acquire Merrill Lynch’s International Wealth Management business outside the US and Japan

13 August 2012 - Julius Baer, the leading Swiss private banking group, has agreed, subject to the regulatory and shareholder approvals, to acquire Merrill Lynch’s International Wealth Management business (IWM) based outside the US and Japan from Bank of America (BofA) with USD 84 (CHF 81) billion of assets under management (AuM) as of 30 June 2012 and over 2,000 employees, including more than 500 financial advisers. Approximately two thirds of IWM AuM are from clients domiciled in growth markets in Asia (more than half), Latin America and the Middle East. The transaction is a combination of legal entity acquisitions and business transfers and, by the end of the expected two-year integration period, is currently estimated to result in additional AuM of between CHF 57 billion and CHF 72 billion, of which approximately two thirds from growth markets.

At CHF 72 billion AuM transferred, this would increase Julius Baer’s existing AuM by approx. 40% to CHF 251 billion and its total client assets to CHF 341 billion at the end of the two-year integration period, both on a pro forma basis. While the bulk of IWM’s business is in locations where Julius Baer is already present, such as Geneva, London, Hong Kong, Singapore, Dubai and Montevideo, the acquisition would add new locations in Bahrain, the Netherlands, India, Ireland, Lebanon, Luxembourg, Panama and Spain to Julius Baer’s existing network. Post integration, Julius Baer will be present in more than 25 countries and 50 locations globally. At CHF 72 billion transferred, the proportion of AuM derived from growth markets is expected to increase from over a third today to almost half, on a pro forma basis. 

Daniel J. Sauter, Chairman of the Julius Baer Group, said: “This transaction represents a rare opportunity to acquire an international pure-play wealth management business of significant size and will add substantial scale to our business in Europe and in key growth markets in Asia, Latin America and the Middle East. Due to its strong presence in strategic growth markets and its business characteristics, Merrill Lynch’s International Wealth Management business is an excellent strategic, cultural and geographic fit for Julius Baer.” 

The agreed transaction price is 1.2% on AuM transferred (payable as and when AuM transfer to Julius Baer). Therefore, assuming CHF 72 billion AuM transferred, Julius Baer’s existing AuM as of 30 June 2012 would increase by approx. 40% to CHF 251 billion on a pro forma basis and its total client assets to CHF 341 billion. At that level of AuM transferred, the amount of regulatory capital required to support the incremental risk-weighted assets is expected to amount to approx. CHF 300 million.

Total transaction, restructuring, integration and retention costs in connection with the necessary transfer of the business to the Julius Baer platform are expected to amount to up to approx. CHF 400 (after tax CHF 312) million. Major components of these costs include IT costs (e.g. maintaining IWM and Julius Baer platforms in parallel throughout the transfer process, as well as platform enhancements, infrastructure and migration costs), retention costs required to incentivise and retain financial advisors and other key personnel, costs for temporary staff as well as other restructuring and integration expenses. Separately, BofA will assume up to an additional CHF 121 (USD 125) million of defined pre-completion restructuring and integration costs.

As part of the transaction, Julius Baer and BofAML have agreed to enter into a cooperation agreement whereby BofAML will provide certain products and services to Julius Baer, including the provision of global equity research, product offerings, as well as structured and advisory products. In addition there will be cross-referral of clients between both organisations.

Source: Julius Baer Group