Bank of America Fund Unit Said to Get BlackRock, Franklin Bids
By Sree Vidya Bhaktavatsalam and Zachary R. Mider
May 6 (Bloomberg) — BlackRock Inc., Franklin Resources Inc. and Federated Investors Inc. made preliminary offers to buy Bank of America Corp.’s mutual-fund unit, said people familiar with the matter.
Additional companies may participate in the bidding, which isn’t open to leveraged-buyout firms, said the people, who asked not to be identified because the process is private. The Columbia Management unit, which oversees $341 billion, may fetch more than $2 billion, according to Michael Kim, a fund-industry analyst with Sandler O’Neill & Partners LP in New York. Kenneth Lewis, Bank of America’s chief executive officer, put Boston-based Columbia up for sale after loan losses and writedowns forced the largest U.S. bank by assets into a $45 billion bailout by the federal government. Columbia would help rivals offset declines in asset-management fees caused by market losses.
“Anyone interested in Columbia would have to do it purely as an asset play to strip off the expenses and keep the revenue stream,” said Burton Greenwald, a mutual-fund consultant based in Philadelphia.
Scott Silvestri, a spokesman for Charlotte, North Carolina- based Bank of America, declined to comment, as did officials for BlackRock in New York, San Mateo, California-based Franklin, and Federated in Pittsburgh.
Columbia managed $186 billion in money-market funds as of Dec. 31 and has more than 90 stock and bond funds. Its $10 billion Columbia Acorn Fund outperformed 90 percent of rivals in the past five years. The unit had a loss of $459 million in 2008 after spending $1.1 billion to support money funds that were in danger of falling below the $1 a share net asset value, the bank said in a February regulatory filing.
Bank of America was among several banks that propped up money funds that suffered from the declining value of securities backed by mortgages.
Money managers similar to Columbia typically trade at a valuation of 0.6 percent to 1 percent of assets, translating into a potential price for the unit of $2.04 billion to $3.4 billion, according to Kim of Sandler O’Neill.