RBC Boosts Efforts To Tap Wealthy With GBP963 Million BlueBay Buy

Royal Bank of Canada (RY) Monday said it has agreed to buy fixed-income fund manager BlueBay Asset Management PLC's (BBAY.LN) equity for GBP963 million, giving the Canadian bank more products to push through its wealth management business.

The offer price of 485 pence per share is a 29.1% premium to BlueBay's 375.70 pence closing price on Oct. 15, and BlueBay shareholders will also receive a previously announced dividend of 7.5 pence per share, for a total consideration of 492.5 pence per share. BlueBay directors with shares representing 20.5% of the company's equity have already pledged to vote in favor of the deal.

The transaction comes amid broader consolidation in the global asset management industry, as independent managers look to tap bigger partners' sales channels, and banks are either unloading or beefing up their asset management arms, depending on how much capital they have.

"This acquisition will further RBC's strategy to leverage our position as a top 10 global wealth manager, and continue to expand our asset management solutions for the benefit of our clients around the world," George Lewis, group head of RBC Wealth Management, said in a statement.

BlueBay Chief Executive Officer Hugh Willis said RBC's strength and stability make it "an ideal partner."

BlueBay, with about $40 billion under management at Sept. 30, floated on the London Stock Exchange in November 2006 with a valuation of GBP571 million. At that time, it had $8 billion under management, after having formed in 2001 with financial backing from Barclays PLC (BCS) and Shinsei Bank Ltd. (8303.TO).

After several years of strong growth, its assets under management contracted during the financial crisis from performance losses at its funds and investor outflows. But in just 12 months between Jan. 1, 2009 and Dec. 31, 2009, BlueBay's assets doubled because of a strong rebound in credit markets.

Willis last month said the company expects to receive between $5 billion and $8 billion in net new money from investors in its 2011 fiscal year. The company runs long-only and hedge-fund fixed-income strategies. At June 30, it managed about $18.3 billion in investment-grade debt funds, $6.87 billion in high-yield and distressed debt strategies and $6.6 billion in emerging markets.

Meanwhile, RBC has been steadily building its U.K. business, particularly in wealth management where it hopes to replicate its success in Canada in winning business from ultra-wealthy private investors.

At 0706 GMT, BlueBay shares were up nearly 31% at 491 pence.

-By Margot Patrick, Dow Jones Newswires; [phone]; [e-mail]