Bank of Montreal agrees to buy UK's F&C for $1.2 billion

LONDON Tue Jan 28, 2014 5:13am EST

Bank of Montreal (BMO) Chairman of the Board J. Robert S. Prichard speaks at the BMO annual general meeting of shareholders in Saskatoon, Saskatchewan April 10, 2013. REUTERS/Derek Mortensen

Bank of Montreal (BMO) Chairman of the Board J. Robert S. Prichard speaks at the BMO annual general meeting of shareholders in Saskatoon, Saskatchewan April 10, 2013.

Credit: Reuters/Derek Mortensen

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LONDON (Reuters) - Canada's Bank of Montreal (BMO.TO) has reached a deal to buy UK-based F&C Asset Management Plc FCAM.L for 708 million pounds ($1.2 billion) just a day after first announcing an offer, saying the move would help expand its wealth management arm.

Tuesday's statement sent shares in F&C, operator of the world's oldest investment trust, up another 4.3 percent on top of double-digit gains the previous day after the bank first said it had made a preliminary bid.

The two companies said F&C shareholders will be entitled to 120 pence in cash for each of their shares, plus a dividend of 2p per share for 2013. F&C's largest investor, insurer Aviva Plc (AV.L) which holds 12.1 percent, has pledged to vote in favor of the deal.

The deal marks a major push for Bank of Montreal, Canada's fourth-largest bank, to expand its wealth management division, which has reported C$184 billion in assets under management.

The strategy follows a similar path trodden by rival Royal Bank of Canada (RY.TO), which also targeted the UK for an expansion of its wealth arm and bought Bluebay Asset Management in 2010.

Following the 2008 financial crisis, many bankers view wealth management as an effective buffer against more volatile capital markets businesses, because of the tendency for clients to stay relatively loyal to their favorite funds or fund managers, and the low capital requirements of asset management firms.

F&C directors holding shares representing 0.2 percent of the company have committed to the deal and will recommend other shareholders approve the deal.

"The products, geographic presence and cultures of both organizations are truly complementary," said Richard Wilson, chief executive of F&C. "This is clearly a very positive outcome for both our clients and employees."

The London-based fund manager, which traces its roots back to the launch of the Foreign & Colonial Investment Trust (FRCL.L) in 1868, also released a trading statement saying it had 82.1 billion pounds of assets under management at the end of 2013, down from 90.1 billion three months earlier.

Analysts said the performance was in line with their forecasts.

Brokerage Numis said that though the takeover appeared to be a done deal, there remained a small possibility of a rival offer. "We would still argue that a counter-bid is not completely impossible, although probably a fairly remote probability," Numis said in a note to clients.

(Additional reporting by Huw Jones; Editing by Tommy Wilkes and David Holmes)

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