Confirming market rumors, Japan’s Nomura Holdings, Inc. NMR announced on Monday that it has inked a deal with Canadian Imperial Bank of Commerce CM – CIBC – to acquire a non-controlling interest in American Century Investments. Notably, Nomura will shell out $1 billion for 41% stake in the Missouri-based money manager.
The deal, which marks Nomura’s biggest overseas investment post the $1.2-billion acquisition of Instinet Inc. in 2007, is consistent with the company’s plans to extend the scale of its operations in the Americas, as announced in Nov 2015. Notably, the company is focused on developing its mergers and acquisitions advisory as well as primary equity and debt business in the region.
More importantly, with this latest move, the company has made a full-scale entry into the world’s largest investment trust market in the U.S.. The acquisition will allow Nomura to leverage American Century Investments' broad U.S.-based sales network to market investment trusts, hosting Japanese and Asian shares, to global retail and institutional clients.
Per the terms of the definitive agreement, Nomura will gain 10.1% voting interest in American Century Investments. Moreover, it will add 2 representatives to the latter’s 11-member board of directors.
American Century Investments had been previously acquired by CIBC for $848 million in cash in Aug 2011. However, on failure to gain a controlling interest in the money manager, Canada’s fifth-largest bank agreed to divest its stake.
Notably, CIBC is expected to record a $170-million after-tax gain from the sale, and generate an internal rate of return of 11% for its shareholders. Further, such divestiture is anticipated to add 50 basis points to the company’s Common Equity Tier 1 ratio, which stood at 10.8% at the end of fiscal fourth quarter of 2015. However, the company re-affirmed its medium-term goals, previously announced at its Investor Day presentation in Oct 2015.
The transaction remains subject to regulatory approvals, and is expected to close in the first half of 2016.
Nomura currently carries a Zacks Rank #3 (Hold). E*TRADE Financial Corporation ETFC and Arlington Asset Investment Corp. AI are two better-ranked investment broker stocks, both holding a Zacks Rank #2 (Buy).
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