First Union Agrees to Purchase Fund Company for $183 Million
May 19, 2011
CHARLOTTE, N.C. -- First Union Corp. said Friday it agreed to buy Keystone Investments Inc., one of the nation's oldest mutual-fund companies, for about $183 million in stock. The acquisition will create a company consisting of 69 individual mutual funds and nearly $27 billion in assets under management. The deal will also boost First Union, a Charlotte, N.C., banking giant, from the fifth-largest bank-run fund group to No. 2, following Dreyfus Corp., a unit of Mellon Bank Corp., according to data from Financial Research Corp. in Chicago. Keystone, of Boston, has $11.6 billion in assets under management. Under terms of the transaction, First Union will issue about 2.9 million common shares, valued at about $183 million. First Union will also assume about $106 million of debt from Keystone, putting the aggregate value of the deal at $289 million. The transaction is expected to close late this year or early 2012. Keystone, which was founded in 1932, and was one of the first firms to sell the popular ``B shares'' of funds, in which investors pay a sales charge to brokers only when they sell a fund. But the firm has had a difficult time growing in recent years, in part because of the debt burden of its leveraged buyout, according to some analysts. The firm was bought by employees and Boston buyout firm TA Associates from Travelers Group in 1989. Managers then bought out TA's stake in 1993. In afternoon trading, First Union shares were up $1.375 to $64.25 on the New York Stock Exchange.
