Mercantile acquiring Ohio asset manager

Boyd Watterson adds to local bank's strengths

Kelly is `delighted' with deal

$3.75 billion boost to assets under management

January 23, 2003|By William Patalon III | William Patalon III,SUN STAFF

Moving to add more muscle to its wealth-management business, Mercantile Bankshares Corp. said yesterday that it will acquire Boyd Watterson Asset Management LLC of Cleveland.

The acquisition is the third major move by Baltimore-based Mercantile since it announced a renewed focus on its asset- and wealth-management businesses.

"This is consistent with the strategy of the company," said Gary B. Townsend, a senior financial services analyst with Friedman, Billings, Ramsey Group Inc. in Arlington, Va. Mercantile is "trying to bolster the asset-management and investment-management sides of its business."

"I'm delighted with this deal," said Edward J. "Ned" Kelly III, Mercantile's president and chief executive officer.

Under the agreement, Mercantile will pay Boyd Watterson shareholders $19.05 million in cash, and will assume an unspecified level of debt.

Additionally, on the third anniversary of the transaction, Boyd shareholders are to receive a cash payment totaling up to $9.525 million -- the amount depending on how well the new unit performs.

Boyd, which was founded in 1928, mirrors many of Mercantile's strengths, Kelly said.

Both have strong fixed-income management businesses, manage union retirement plans and manage their equity investments with a value-oriented regimen.

Boyd has approximately $3.75 billion in assets under management, boosting Mercantile's size in that arena.

As of Sept. 30 -- the most recent figures available -- Mercantile said it had $35.4 billion in assets under administration, of which $15.4 billion was managed directly by the bank's wealth-management unit.

A year ago, Kelly identified asset management as the best opportunity to hasten Mercantile's profit-growth rate. In February, he hired Wallace Mathai-Davis, a well-known investment industry veteran, to bulk up Mercantile's wealth-management arm.

Since then, Mathai-Davis has made a number of key hires and helped engineer several deals -- including yesterday's announced Boyd buyout.

Last March, Mercantile bought a minority stake in Winston Partners, a McLean, Va.-based firm that operates hedge funds and invests in private companies. In early December, Mercantile formed a strategic alliance with Geneos Wealth Management Inc., an independent broker-dealer based in Denver.

The Boyd transaction should be completed in 30 to 60 days, Mercantile said. Boyd will continue to operate as an independent unit of Mercantile, as do some of its affiliate banks, the company said.

Shares of Mercantile lost 66 cents yesterday to close at $38.41 on the Nasdaq stock market. The deal was announced after the markets closed.

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