By Julie MacIntosh, Francesco Guerrera and Greg Farrell in New York
Published: July 1 2009 01:27 | Last updated: July 1 2009 01:27
Bank of America’s asset management business is drawing lukewarm bids now that BlackRock, once its likeliest suitor, has opted to pay $13.5bn for Barclays Global Investors, according to people close to the matter.
BofA is hoping to reap at least $3bn from a sale of Columbia Management, those people say, but bids so far have come in closer to $2bn.
To boost those results, BofA could consider dividing Columbia into twoand entertain separate offers for its large money market funds operation, which is less valuable to some bidders.
Many asset managers are shrinking or shutting their money market funds businesses, which operate on low margins and pose new legal and financial risks as a result of the banking crisis. A company with significant scale in money market funds, however, such as Federated Investors, could be willing to pay for those assets separately, allowing other bidders clearer access to the rest.
A decision on whether to split the business has not been made, and with several bidders interested in the entire operation, such a move may not be necessary if the pricing gap narrows.
Citigroup analysts said Columbia could be worth $2.5bn-$3.5bn as a multiple of net income, or about $3bn as a percentage of assets under management.
Bank of America had no comment on the matter.
BlackRock had been a leading candidate to buy the business, but its hands have become full, say people close to the situation. Chief executive Larry Fink said when he announced the $13.5bn BGI purchase two weeks ago he was “not doing any more transactions for the time being”.
Bankers say Columbia could draw interest from other large asset managers, such as Invesco, Oppenheimer or Franklin Templeton, which is considering the purchase of AIG’s asset management business, as well as insurance companies. Private equity investors initially looked at Columbia, but were later told the auction would be limited to strategic bidders.
Buy-out firms remain interested, however, in First Republic, the private bank and mortgage lender BofA is also attempting to sell. A group led by former bank executive Gerry Ford, which has included Blackstone, Carlyle, Oakhill and TPG, appears to have the highest degree of interest in the business, according to people close to the matter.
First Republic, if sold, could be priced at about its tangible book value, which people close to the business said ranged from $600m to $800m depending on how its assets were marked and the degree to which BofA agreed to share losses.
Interested buyers are hoping BofA will provide similar structured loss-sharing benefits to what the US government has provided in bank rescue deals.
Copyright The Financial Times Limited 2009