Merrill to Buy Midland Walwyn
Merrill Lynch & Co. said Monday that it will buy Canada’s largest independent brokerage firm, Midland Walwyn Inc., for about $829 million in stock in a move to reenter the Canadian retail business.
Merrill deserted its Canadian private-client business in 1990 when it sold its retail operations to Canadian Imperial Bank of Commerce’s CIBC Wood Gundy Securities Corp. Merrill, which has continued to build its investment banking operations in Canada, said it decided to get back into the retail business because the Canada has loosened its financial services regulations in recent years.
“We were inhibited [in the 1980s] from managing our business on an integrated basis, offering bank-like products, and it was difficult to reach size and scale,” Merrill’s chief executive, David Komansky, said at a New York news conference. “In addition, the markets have globalized and the moons and stars lined up.”
Under terms of the deal, the U.S. securities powerhouse will issue 0.24 share for each Midland Walwyn share.
Merrill said it would take a charge of $22 million, or 5 cents a share, for the transaction. Excluding those one-time costs, the firm expected the acquisition not to reduce earnings this year and in 1999, and to start contributing to its bottom line in 2000.
Midland Walwyn’s price tag was seen as generous but not excessive. With persistent rumors that a deal was about to be clinched, the Canadian brokerage’s stock already had gained more than 30% in the past two weeks.
Merrill’s chief strategist, Jerome Kenney, told reporters after the news conference that the firm had been eyeing Canada--the world’s fifth-biggest market for actively managed assets and third-largest for stock offerings--for some time.
Midland Walwyn has some 1,300 brokers in 116 retail offices. Last year, the company posted a $41-million profit on revenue of $569 million and was Canada’s fifth-largest equity underwriter and 24th-largest debt underwriter. The firm’s 600,000 client accounts hold about $28.5 billion in assets.
The combined firm, which will do business as Merrill Lynch, will rank among Canada’s top three firms in the private-client brokerage business; underwriting, mergers and acquisitions; and bond and stock trading, Merrill said.
Merrill shares closed at $87.75, down $2.56 on the New York Stock Exchange. Midland Walwyn shares closed at a record $20.46, up $1.95, on the Toronto Exchange.