Julius Baer buys ING's Swiss private banking business

Swiss private bank Julius Baer Group will buy ING Bank (Switzerland) for SFr520 million ($505 million) in cash.

Julius Baer will gain SFr15 billion of assets currently under management with ING in Switzerland, adding 10% to its current AUM. This will take Julius Baer's AUM to SFr160 billion as of August. The acquisition price translates into about 2.3% of AUM, excluding capital deemed surplus on the books of ING Bank (Switzerland), and about 3% of AUM including the surplus capital, according to Julius Baer.

Julius Baer will also double its presence in Geneva through the addition of 310 ING staff, of which 80 are relationship managers.

The acquisition is expected to be neutral for Julius Baer's earnings per share in 2010 but accretive from 2011 onwards. Julius Baer is expected to benefit from SFr35 million of synergies, primarily due to the integration of information technology, back office and staff functions.

The price met the expectations of the seller, while leaving enough on the table for the buyer to create value, said a specialist.

ING Bank (Switzerland) is a subsidiary of ING Group. The Swiss entity also includes subsidiaries in Monaco and Jersey.

Julius Baer said the deal will not only add to its domestic business in the French-speaking part of Switzerland and select European markets but will also increase its business volume in Central and Eastern Europe, Russia and other growth markets.

The negotiations between the buy- and sell-sides were very constructive and centred around give and take, said a source close to the situation. Julius Baer was accommodating on certain aspects such as the closing net asset value of the business and on having a watered-down material adverse change (MAC) clause. In return, ING provided representations and warranties critical to Julius Baer taking the deal forward.

"Julius Baer is taking advantage of current market developments in acquiring a high-quality, profitable asset with a strong track record," Raymond Baer, chairman of Julius Baer, said in a written statement announcing the deal. "The client base is similar to the one of Julius Baer and ING Bank's employees share the same client-centric passion, making it a true cultural fit."

ING Bank's roots in Switzerland date back to 1962, when Banque Bruxelles Lambert established a subsidiary in Geneva.

Julius Baer will rebrand ING Bank and merge the operations into its local business in Switzerland. The ING subsidiaries in Monaco and Jersey will be integrated into the existing operations of Julius Baer in these countries.

J.P. Morgan worked with ING Bank on the sale. The chief executive officer for ING private banking worldwide Philippe Damas is based in Singapore and, as a result, the J.P. Morgan team was led out of Singapore, said sources. Julius Baer was advised by UBS.

ING announced that it would sell its private banking businesses in Switzerland and Asia earlier this year as part of a plan to sell non-core assets and strengthen its balance sheet. HSBC is reported to have looked at the businesses, while DBS Singapore and Credit Suisse are also said to be in the running for the Asia business. In 2005 ING had $10 billion of AUM in Asia, as per the Dutch bank's website.

It was always likely the Asia and Switzerland businesses would be sold to different parties, said a source. Logistically it would have been easier to have one buyer but the primary considerations were price, certainty of closing, and timing.

The sale of the Asia business is expected to be announced within a fortnight, said the source. ING's Asian private banking assets represent a rare opportunity for a buyer to get a portfolio in Asia, and specialists expect the sale could net ING as much as $1.5 billion. The deal will be announced once regulators are on board so that when the deal is made public, approvals will be a formality.

The sale of the Swiss private banking business comes soon after ING disposed of its 51% ownership in its Australian wealth management and insurance businesses. The Australian assets were sold to ING's joint venture partner, the Australia and New Zealand Banking Group (ANZ), and the transaction saw the Dutch bank exit both businesses.