CIBC to acquire Oppenheimer & Co. for $525 million
NEW YORK (AP) _ Canadian Imperial Bank of Commerce said today it will buy Oppenheimer & Co. for $525 million, the latest in a wave of brokerage acquisitions by big commercial banks eager to build lucrative franchises on Wall Street.
The acquisition will allow the Canadian bank to broaden its securities operations in the United States. It will combine Oppenheimer with its CIBC Wood Gundy investment banking unit. The new firm will be called CIBC Oppenheimer Corp.
A relaxing of barriers between the securities and commercial banking industries in the United States has lead to a feeding frenzy on Wall Street. Banks on the hunt for new sources of revenue have found brokerages and investment banks very attractive bargains as stock market profits boom.
Canadian Imperial Bank had been interested in finding a partner to build a U.S. stock underwriting and mergers advisory business. Oppenheimer was looking for a company with significant capital and an international presence that could help it expand. The deal would fulfill the goals of both companies.
Under the deal, CIBC will pay $350 million in cash for the closely held U.S. brokerage house. It also will provide a $175 million pool to be paid out over three years to help retain key executives from the firm. The deal, which is subject to regulatory approval, is expected to be completed by the end of the year.
Michael Rulle, the chairman and chief executive of CIBC Wood Gundy Securities Corp. and head of CIBC Wood Gundy USA, will become chairman and chief executive of the new entity. Oppenheimer chairman Stephen Robert and President Nathan Gantcher, who are co-chief executives of the firm and together own a 40 percent stake, will become vice-chairmen of the merged company.
``This is an excellent strategic acquisition for CIBC and positions us for continued growth and expansion throughout the North American marketplace,″ said Al Flood chairman and chief executive of Canadian Imperial Bank. ``The combined strengths of CIBC Wood Gundy and Oppenheimer will enable us to provide a more complete range of financial services to our clients.″
CIBC Wood Gundy said the acquisition positions it particularly well within the consolidating financial services industry, while providing the firm with access to U.S. equity products, a capability that its clients increasingly require.
``We believe that there will soon be only 20 or so firms that will have a real equity presence in the United States and only a few of those will be able to combine that capability with the strength in credit products normally associated with commercial banking,″ Rulle said.
The deal follows a string of mergers on Wall Street, the most prominent being the recently completed combination of Morgan Stanley Group Inc. with Dean Witter Discover & Co. It also underscores the march on Wall Street by commercial banks.
The deals so far include: NationsBank Corp.’s planned $1.2 billion acquisition of Montgomery Securities; BankAmerica Corp. proposal to acquire Robertson Stephens & Co. for $540 million; A $600 million Swiss Bank Corp.-Dillon, Read & Co. combination; and a $1.7 billion transaction between Bankers Trust New York Corp. and Alex. Brown Inc.
New York-based Oppenheimer, the second-largest private securities firm and No. 30 overall, has been considering a number of prospective partners since late last year, including Bayerische Vereinsbank of Germany and PNC bank of Pittsburgh.