Columbia Threadneedle buys European investment arm of Canada’s BMO

US asset manager Columbia Threadneedle has agreed to buy the European investment arm of BMO Financial Group of Canada for $845m in cash, the latest example of mergers and acquisitions activity that is sweeping across the fund management industry.

The race to build ever larger asset management businesses has accelerated due to intense competitive pressures and structural challenges including demographic shifts, fee wars and rising costs due to technology spending and changing regulatory requirements.

Columbia Threadneedle’s assets under management will increase to $671bn with the acquisition of BMO’s $124bn business in Europe, the Middle East and Africa. The deal will bring new investment teams overseeing real estate, pensions and responsible investment strategies under the control of the US asset manager.

“The acquisition of the Emea asset management business of BMO will expand and enhance our established strengths,” said Ted Truscott, chief executive of Columbia Threadneedle. “It positions us well to respond to the developing needs of our clients.”

The team running the F&C Investment Trust, which was launched in 1868 and is the world’s oldest investment trust, will transfer from BMO to Columbia Threadneedle as part of the deal. BMO bought London-based F&C Asset Management for $708m in 2014 when it was overseeing about $127bn in assets.

Nick Ring, head of Columbia Threadneedle’s Emea operations will lead the enlarged group.

Truscott said he expected the “vast majority” of BMO’s 800 Emea-based staff to join Columbia Threadneedle, and declined to be drawn on the scale of possible job losses. Columbia Threadneedle also declined to disclose possible cost savings and revenue synergies from the acquisition.

The price paid by Columbia represents the equivalent of 0.7 per cent of BMO’s European assets, a relatively modest valuation.

 “We are a disciplined acquirer and paid a fair price,” said Truscott. “This transaction which will build on our record of successful acquisitions for the benefit of clients and our other stakeholders.”

The acquisition is expected to prove “mildly accretive” to earnings from 2023 onwards for Ameriprise, the US listed-financial services group that owns Columbia Threadneedle.

Truscott said the deal would generate an internal rate of return of 20 per cent and it would not affect Ameriprise’s ability to return capital to investors through dividend payments or share buybacks.

Ameriprise share price has risen about 133 per cent over the past 12 months. The deal is expected to close in the fourth quarter of 2021, subject to regulatory approval.