<strong>Julius Baer, Bullish on Merrill Lynch<strong></strong></strong>

Julius Baer, the Swiss private bank, is to acquire Merrill Lynch's International Wealth Management business, Reuter's reports. The total price tag for purchase is $860 million Swiss Francs. Baer claims it will boost its assets under management by 40 percent. Bank of America BAC bought Merrill Lynch back in 2008 will receive a 3.2 percent stake in Baer. Typically a large acquisition like this would unnerve investors and this was no acceptation. In Zurich trading the stock was down 5.4 percent, cutting its market cap by 6.57 billion francs. The cost of the deal includes new capital requirements underBasel III regulatory standards. There is also not much fanfare from Frankfurt-based analyst Dirk Becker of Kepler Capital Markets. “I can't see anyone getting too excited about this.” Becker has a hold rating on Baer. “It is big business, but not a profitable one, and they've lowered their financial targets”, Becker told Bloomberg. The wealth manager said it was committing 530 million Swiss francs in cash to fund the acquisition and needed to raise an additional 750 million francs through a rights issue. Baer also plans to raise 200 francs through hybrid bond sales. Bank of America will be granted $240 million francs worth of stock. Reuters reported this acquisition is part of Julius Baer's growth strategy to strengthen its position as a global private bank. The deal gives Baer increase scale and international offices presence in growth regions it formally did not have. Merrill Lynch will cut some Baer's exposure to the Swiss franc. It is estimated that two thirds of Merrill's business are in emerging markets, Latin America, Asia and the Middle East. The deal needs to pass regulatory hurdles that could hinder the time to formally close the deal until early 2013. The Merrill deal has been the largest acquisition since it bought Ehinger Armand von Ernst, Ferrier Lullin & Cie, BDL Banco di Lugano and asset manager GAM for 5.6 billion francs from UBS in 2005. Baer also bought ING's Swiss banking arm back in 2009 for 520 million francs, Reuter's reports. These are some very uncertain times for large international banking acquisitions. Giving the political and economic theater in Europe and the United States Julius Baer might be biting off more than it can chew. Especially that Merrill Lynch's International Wealth division had a pre-tax loss last year. Baer also realizes that changes in U.S. tax law concerning Swiss accounts as a tax haven will cut into the bank's profit margins. The need to expand into growth markets according to CEO Boris Collardi will boost earning and is targeting a 15 percent increase per share from 2015, Reuter's reports. “This acquisition brings us a major step forward in our growth strategy and will considerably strengthen Julius Baer's leading position in global private banking,” said Collardi, adding that there will be some job consolidation.