(Updates to include more details on Columbia assets to be sold and about Bank of America's previous statements about Columbia.)
By Marshall Eckblad
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Bank of America Corp. (BAC) agreed to sell the stock and bond mutual fund business of its Columbia Management unit to Ameriprise Financial Inc. (AMP) for as much as $1.2 billion.
Once the transaction closes in the spring, Ameriprise's asset-management business will have global assets under management of nearly $400 billion and become the eighth-largest U.S. manager of long-term mutual funds, it said.
Bank of America said last May it would sell Columbia as part of a plan to raise capital. Bank regulators had told Bank of America to raise $33.9 billion after the government conducted a stress test of the nation's biggest banks.
The bank finished raising the capital as mandated earlier this year, but indicated it would proceed with a sale of Columbia. Bank of America also said in May that it would try to sell its retail bank First Republic, although the bank has yet to announce a buyer for that business.
Columbia's long-term asset-management business, which includes the Columbia mutual funds and other private assets managed by Columbia, had about $165 billion in equity and fixed-income assets under management as of June 30.
Bank of America will retain Columbia's cash-management business.
The acquisition is expected to begin adding to Ameriprise's earnings and return on equity within a year, excluding integration costs, it said.
In premarket trading, Bank of America shares rose 0.9% to $17.31 while Ameriprise climbed 11% to $36.00.
The total to be paid to Bank of America is expected to be between $900 million and $1.2 billion, based on net asset flows, Bank of America said.
Ameriprise Chairman and Chief Executive Jim Cracchiolo said the deal "transforms our asset-management business, a core component of our integrated-business model, and will significantly accelerate our growth." The combined business will serve a broad range of investors.
The asset-management industry has been ripe for deals this year. The biggest deal of 2009 was BlackRock Inc.'s (BLK) $13.5 billion acquisition of Barclay's Global Investors.
In addition, Morgan Stanley (MS) is shopping around its Van Kampen fund business. There has been some speculation that money managers like Invesco Ltd. (IVZ), Nuveen or Franklin Resources Inc. (BEN) might be among the likely suitors.
-By Marshall Eckblad and Mike Barris, Dow Jones Newswires; 212-416-2156; mike.barris@dowjones.com