Credit Suisse to Buy Warburg’s Asset-Management Unit

Credit Suisse Group, Europe’s fourth-largest bank, agreed to buy U.S.-based Warburg Pincus Asset Management Inc. for $650 million to expand in the world’s biggest financial-services market.

The acquisition of the asset-management arm of Warburg, Pincus & Co., expected to be completed by midyear, will boost Credit Suisse’s assets under management by more than $22 billion to $680 billion, the bank said. The two companies had already been cooperating in other businesses.

Credit Suisse and other banks are reducing their exposure to risky businesses, such as emerging markets, and focusing more on asset management and private banking, where earnings are more predictable. Merrill Lynch & Co. last year paid about $5 billion for Mercury Asset Management Group, Britain’s biggest fund manager, to create the world’s No. 3 asset manager.

“This is a step in the right direction” for Credit Suisse, said Regina Anhorn, an analyst at Lombard Odier & Cie in Geneva. “Warburg Pincus has a very good reputation and a strong distribution network.”

The latest round of asset-management acquisitions is also being driven by banks seeking profits as European and Asian governments overhaul their pension systems, forcing people to save for their own retirements.

Credit Suisse and Warburg Pincus Asset Management formed a distribution alliance last June to market mutual funds in the U.S. The combination will give Credit Suisse $56 billion of assets under management in the U.S. and will be “neutral to slightly” helpful to its earnings this year, a spokeswoman at the Zurich-based bank said.

Any job cuts resulting from the acquisition will be modest, the spokeswoman said. Warburg Pincus Asset Management employs about 260 people.

Credit Suisse said it will pay for the purchase with cash and shares, with $450 million to be paid initially and an additional $200 million over three years.

William Priest will remain chief executive of Credit Suisse Asset Management’s operations in North America and Latin America, while Arnold Reichman, Warburg Pincus Asset Management’s chief operating officer, will be given the same position at Credit Suisse Asset Management.

As part of the agreement, Credit Suisse also took a 19.9% “passive minority equity stake” in Warburg Pincus’ private equity arm, which manages more than $7 billion in equities and has $5 billion more available for investment, the companies said. The deal will have no effect on the private equity business of Credit Suisse First Boston, Credit Suisse’s investment banking unit, they said.