Royal Bank of Canada to buy BlueBay Asset Management

By Sudip Kar-Gupta

LONDON (BestGrowthStock) – Royal Bank of Canada pounced to buy fund manager BlueBay Asset Management for around 963 million pounds ($1.5 billion) as the Canadian group looks to cement its position as a top 10 global wealth manager.

Canada’s biggest bank by market value said on Monday it was offering 485 pence for each BlueBay share, representing a premium of 29 percent to the latter’s closing price of 375.70 pence on Friday, October 15.

BlueBay was founded in 2001 and listed on the London Stock Exchange in November 2006. With $40 billion of assets under management as of September 30, up 17 percent from June, it has grown to become one of Europe’s leading bond fund managers.

BlueBay’s co-founders, Chief Executive Hugh Willis and Chief Investment Officer Mark Poole, stand to make several millions from the RBC takeover.

The former credit traders, who had worked at JP Morgan and Kleinwort Benson, netted some 30 million pounds apiece from the 2006 flotation, and both financiers have regularly featured on The Sunday Times’ rich list.

BlueBay said in a trading update it was optimistic over its prospects for the current financial year and beyond. In September it reported a 183 percent surge in full-year profits, boosted by its core investment-grade debt products.

Royal Bank of Canada and its domestic peers fared better than most global rivals during the financial crisis and several are now seeking to take advantage of their competitive position.

RBC has said consistently this year it is on the lookout for acquisitions and said the BlueBay deal fitted its strategy of growing its wealth management arm.

“This acquisition will further RBC’s 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.

FUND MANAGEMENT CONSOLIDATION

BlueBay shares were up 30 percent at 488.3 pence by 0855 GMT. Although the stock was slightly above RBC’s offer price analysts said the transaction looked like a done deal.

“This price looks very full and may not leave room for any counter bidders,” Oriel Securities analysts said in a note.

KBC Peel Hunt said in a research note that RBC’s offer valued BlueBay at around 19 times its expected 2011 earnings, while Numis Securities said the bid valued BlueBay at 18 times its forecast 2011 earnings.

Such multiples are roughly in line with other deals in the sector as financial companies worldwide target potential acquisition opportunities in the wealth management and asset management sectors.

Earlier this month, John O’Connell — a co-founder of Royal Bank of Canada’s Harbour Group — announced the purchase of boutique money manager Davis-Rea, while Societe Generale and JP Morgan told the Reuters Private Banking Summit this month they were on the lookout for Swiss private banking assets.

In one of the biggest fund manager acquisitions so far this year, Man Group acquired hedge fund GLG Partners for $1.6 billion in a deal analysts said valued GLG at 19.8 times forecast earnings.

Perella Weinberg Partners advised RBC on the deal, while Spencer House Advisers and Credit Suisse advised BlueBay.

(Editing by David Holmes)

($1=.6252 Pound)

Royal Bank of Canada to buy BlueBay Asset Management