Wednesday, September 30, 2009

Ameriprise practically STEALS Columbia Management (AMP, BAC)

Ameriprise investors should be doing the Carlton dance:

This is absurd, in a good way, depending on whether you own shares in Ameriprise or Bank of America. I'm awaiting call back from Ameriprise to get some extra detail, but in the meantime....
Ameriprise Financial (AMP) announced that they're buying the long-term piece of asset management business Columbia Management from Bank of America (BAC). Ameriprise share are up 12% on the news, and BAC shares are down 2%. Why?

Because Ameriprise essentially paid $1billion for about $300million in expected annual net income for this business -->> a Price-to-Earnings of less than 3.5! And that's based on the June09 quarter's number, which is likely headed higher thanks to improved equity market performance. What the HELL was BofA thinking??????

Ameriprise is picking up $165billion in assets under management($93m equity, $75m fixed income) for $1billion -->> they're paying 60basis points for this, which should be pleasing to them and SCARY to other asset management outfits, as it's a much lower % of assets than these sales often fetch. Importantly, Ameriprise is not buying the "cash management" business that BofA has had to sink billions into over the last couple years.

This deal will be massively accretive to Ameriprise earnings, even before they pull costs out of the business- a fine job done by management!

Details on Columbia, from BofA's most recent 10q:

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