CIBC expands U.S. presence
Bank makes deal to acquire Chicago-based wealth management firm Geneva Advisors for up to $200M
The Canadian Imperial Bank of Commerce has taken another step to expand its presence in the United States with a deal to acquire Chicago-based private wealth management firm Geneva Advisors for up to US$200 million.
The announcement of this definitive agreement comes less than a month after Canada’s fifth-biggest lender completed its US$5 billion acquisition of Chicago-based PrivateBancorp Inc., which gave it some much-coveted exposure south of the border as the economy at home slows.
CIBC said on Monday that this “complementary acquisition will enhance CIBC’s presence in the region, and build on the bank’s ability to deepen client relationships in the U.S. following the recent acquisition.”
“This investment will add scale in key markets where we can offer clients differentiated, high-touch service,” said Larry Richman, group head of U.S. Region for CIBC and president and CEO of The PrivateBank.
Geneva Advisors, which focuses on high net worth clients and has US$8.4 billion in assets under management and roughly 100 employees, will become CIBC Atlantic Trust Private Wealth Management upon closing of the deal.
Under the terms of the agreement, CIBC will acquire Geneva Advisors for up to US$200 million, of which US$135 million will be paid at closing and US$65 million is contingent on future conditions being met.
The total purchase price will be paid 25 per cent in cash and 75 per cent in the form of CIBC common shares.
CIBC expects the deal to close in the fiscal fourth quarter, and be accretive to earnings per share by fiscal 2019.
Some analysts were surprised by Monday’s announcement.
“We were a little surprised by this transaction, announced so soon after the close of the PrivateBancorp acquisition,” Doug Young, an analyst with Desjardins Capital Markets in a note to clients.
“With that said, in terms of size the transaction appears manageable and overall is on strategy with management’s goal to further add scale in the U.S.”
John Aiken, an analyst with Barclays in Toronto, said that although the deal is not overly material, the focus on wealth management for U.S. acquisitions “should be reasonably well received.”
“However, coming almost immediately off the heels of the PrivateBancorp purchase closing, this could raise some concerns that CIBC could be back on the acquisition trail too soon and potentially move the timeline forward for its next commercial bank tuck-in,” he told clients in a note on Monday.
“From a capital perspective, we have few concerns, given the significant portion of the purchase being funded through a share issuance.”