CIBC (TSX: CM) (NYSE: CM) announced today that it has entered into a definitive agreement to sell its minority position in American Century Investments (ACI) to Nomura, for approximately US$1 billion.
CIBC acquired a 41 per cent equity interest in ACI in August 2011 for US$848 million in cash. The sale, expected to be completed in the first half of 2016 subject to regulatory approval, will generate a gain of approximately US$170 million (net of taxes); and an 11 percent internal rate of return (proceeds and dividends net of tax) for CIBC shareholders.
“We have enjoyed a strong and mutually beneficial relationship with ACI, and our minority position in their business has proved to be a very good investment for our shareholders,” said Victor Dodig, CIBC president and chief executive officer. “Recognizing that a path to control was not going to be available over time, we made the decision to work with ACI to monetize our investment. Through this divestiture we will further strengthen our strong capital position and we are moving forward with a clear set of strategic priorities to drive our long-term growth.”
“I want to thank CIBC for what proved to be a mutually beneficial relationship over the past four years. Going forward, CIBC remains one of our largest and most-valued clients,” said Jonathan S. Thomas, American Century president and chief executive officer.
The sale will add approximately 50 bps to CIBC’s Common Equity Tier 1 ratio last reported as 10.8 percent ending Q4 2015. CIBC maintains its medium term goals as outlined in its October 2015 Investor Day presentation.
Following closing of this transaction, ACI will continue to provide sub-advisory services to several funds and investment portfolios managed by CIBC Asset Management.