The large CIBC sign outside the bank's office building at the southeast corner of King St. West and Bay St. in Toronto’s financial district.Fred Lum/The Globe and Mail
Canadian Imperial Bank of Commerce has struck a deal to buy Geneva Advisors for up to $200-million (U.S.), taking another step toward building a renewed presence in the United States.
Geneva Advisors is a private wealth-management firm based in Chicago, with about $8.4-billion in assets and 100 staff.
Only $135-million of the purchase price will be paid at closing, and the remainder is contingent on future performance CIBC said in a news release. A quarter of the purchase price will be paid in cash, with the remaining 75 per cent in CIBC common shares.
The deal is consistent with signals that chief executive officer Victor Dodig has sent about the bank's interest in "tuck-in" acquisitions in wealth management to complement CIBC's earlier acquisition of Chicago-based PrivateBancorp for $4.9-billion, which closed in late June. After mostly withdrawing from the United States more than a decade ago, CIBC has been making a determined push back into the market in search of new avenues for growth.
This latest transaction is expected to close in the fiscal fourth quarter, subject to regulatory approvals. If successful, Geneva Advisors would become part of CIBC Atlantic Trust Private Wealth Management. "This investment will add scale in key markets where we can offer clients differentiated, high-touch service," Larry Richman, CIBC's newly minted group head for the U.S. and CEO of PrivateBancorp, said in a statement.
In an interview with The Globe and Mail last month, Mr. Dodig said he would look at complementary acquisitions "if it strengthens the franchise in any particular cities," and if "there's a good cultural fit, and there's very little technological integration."
Geneva Advisors focuses on high-net-worth clients, a desirable segment also served by PrivateBancorp. "CIBC shares our client-focused culture and team-based approach," said Bob Bridges, principal and portfolio manager at Geneva Advisors, in a news release.
The deal should be "reasonably well received," according to John Aiken, an analyst at Barclays Capital Canada Inc., in a research note. But coming on the heels of the PrivateBancorp purchase, "this could raise some concerns that CIBC could be back on the acquisition trail too soon," he added.
Should the deal close, CIBC would have about $50-billion in assets south of the border. The purchase would also reduce the bank's common equity Tier 1 capital ratio – one measure of financial health watched by regulators – by six basis points. (A basis point is one-100th of a percentage point).
"From a capital perspective, we have few concerns, given the significant portion of the purchase being funded through a share issuance," Mr. Aiken said.
James Bradshaw