New York: Bank of America Corp. said on Wednesday it is selling the long-term asset management business of one of its units to Ameriprise Financial Inc.
Ameriprise, a financial planning services firm based in Minneapolis, will pay between $900 million and $1.2 billion in cash for Columbia Management’s long-term asset management business. The division has $165 billion in equity and fixed-income assets under management. The final price will be based on asset flows and investor consents leading up to the closing of the deal.
Charlotte, North Carolina-based Bank of America has been among the banks hardest hit by the recession and mounting loan losses. The bank has received $45 billion in government bailout money over the past year. It was also required by the government in May to raise an additional $33.9 billion to help protect against potential future losses should the economy struggle to recover.
At that time, analysts predicted Bank of America could shed Columbia Management as part of its capital-raising efforts. However, the bank ended up raising the necessary money through other asset sales, stock offers and debt conversions.
Bank of America said it is still considering what to do with the short-term cash asset management business currently run by Columbia.
Boston-based Columbia Management was acquired by Bank of America in 2004 as part of its acquisition of FleetBoston Financial. Bank of America combined its asset management business with FleetBoston’s, keeping the Columbia Management name.
Bank of America decided to sell the long-term asset manager, which includes managing the Columbia family of mutual funds, after completing a review of all its operations this year. The companywide review came after the purchase of investment bank Merrill Lynch & Co. in January.
Ameriprise said the acquisition will boost its earnings within one year, excluding integration costs. The financial firm said the acquisition will generate between $130 million and $150 million in annual cost savings, with about half of the savings being realized in the first year after the purchase is completed.
Combined with its current operations, Ameriprise will manage about $400 billion in assets after the deal is completed.
The deal is expected to close in the spring of 2010.
Shares of Bank of America rose 11 cents to $17.27 in morning trading, while Ameriprise shares surged $3.96, or 12.2%, to $36.30.