Canadian Imperial Bank of Commerce has sewn up a deal to buy out its minority partners in TAL Global Asset Management Inc. and finally assert control over the firm seven years after buying into it.
A CIBC spokeswoman would not say how much the bank is paying for the approximately 34-per-cent stake in Montreal-based TAL that it is buying from the employee-shareholders.
However, people familiar with the deal indicated the price is in the $350-million to $400-million range, with roughly $50-million or $60-million of that in the form of "sweeteners" to buy out the stock options of key partners in the firm and persuade them to stay on.
CIBC paid about $100-million in all for the approximately 66 per cent of TAL it already owned.
The deal gives the bank 100 per cent of TAL Global, which manages about $20-billion in institutional funds, along with about $25-billion in CIBC mutual funds, as well as 100 per cent of both independent mutual fund manager Talvest and TAL Private, which caters to well-heeled private clients.
Between them, Talvest and TAL Private manage an additional $10-billion or so in assets.
"Wealth management is a strategic focus for CIBC and an area the bank is committed to growing," Gerry McCaughey, a CIBC senior executive vice-president who heads the bank's operations in this area, said in a statement.
"Acquiring full ownership of TAL is an important step in developing our wealth management franchise and growing TAL as well."
Mr. McCaughey will take over as TAL Global's president and chief executive officer, CIBC said, adding that it will maintain both TAL's name and its head office in Montreal.
Jean-Guy Desjardins, the firm's chairman and current CEO, has chosen to resign to pursue other interests, CIBC said.
Mr. Desjardins is said to have had a stormy relationship with CIBC ever since the bank bought its initial 55-per-cent stake in the firm in 1994, and particularly since John Hunkin took over the top job at CIBC in 1999.
In an unusual move, CIBC agreed to leave voting and operational control in the hands of the firm's owner-managers when it bought in seven years ago.
Sources close to CIBC said yesterday that this complex arrangement has, among other things, precluded the bank from expanding its wealth management business through acquisitions because TAL could "lay claim to" pretty much whatever it acquired.
"Now we can do some strategic things that we couldn't do in the past," one of the sources said.
The Globe and Mail reported last week that talks were under way between CIBC and TAL, which was founded in 1972.
While observers have warned that the bank would risk losing key TAL portfolio managers -- who have treasured their independence -- by boosting its stake, CIBC officials indicated they have signed two-year contracts with about 30 key executives at the firm.
Analyst Heather Wolf of investment dealer Goldman Sachs & Co. in New York said the deal is "a positive over all" for CIBC.
From a strategic standpoint, Ms. Wolf said, it will enable the bank to "leverage" TAL's abilities as a "manufacturer" or creator of mutual funds, while financially, it will add to the bank's retail-oriented earnings. "CIBC management has indicated they would like to expand the retail banking and wealth management contribution to earnings, and this accomplishes that."
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