On Friday, First Republic Investment Management Inc., a wholly-owned subsidiary of First Republic Bank (FRC - Analyst Report), announced the acquisition of California-based Luminous Capital Holdings, LLC, an SEC-registered investment adviser (RIA). Financial terms of the deal were not disclosed.
The acquisition by First Republic Bank demonstrates its aim of providing exceptional services to its clients with the purchase of such a flourishing wealth management firm. Subject to certain customary conditions, the transaction is anticipated to be closed by December 31, 2012.
As per the terms of the cash-deal, six partners of Luminous Capital will enter into long-term employment contracts. Moreover, First Republic Bank will acquire all of the assets of Luminous Capital and expects the transaction to be moderately accretive to 2013 earnings.
Keefe, Bruyette & Woods, a unit of KBW, Inc. and the law firm of Paul Hastings, LLP acted as advisors to Luminous Capital. Moreover, Silver Lane Advisors and the law firm of Arnold & Porter, LLP served as advisors to First Republic Bank.
Luminous Capital, which provides wealth management advices to high net worth clients, family offices and family foundations, has offices in Portola Valley on the San Francisco Peninsula and in Century City. Moreover, the firm serves the same markets as First Republic Bank and possesses about $5.5 billion of wealth management assets.
After-Effects of the Deal
Having strengthened its foothold over the years, First Republic Bank commands a strong presence in California. Therefore, with the acquisition of Luminous Capital, the company will expand further with the help of the acquired firm’s wealth management brand and proficiency. Additionally, wealth management assets of First Republic Bank will be enhanced by $5.5 billion.
With the aim of providing a wide array of banking services to its clients, First Republic Bank has become enthusiastic in making acquisitions and preparing a platform for growth. Moreover, this acquisition is significant of the company’s efforts towards providing quality investment services and advice to clients.
On the other hand, the deal widens Luminous Capital’s scope and will help its expansion efforts with the commitment of providing investment decisions to its clients. Overall, the clients of Luminous Capital will have access to the additional services and products provided by First Republic Bank, while the company will take advantage of Luminous Capital's investment management potencies.
The acquisitions of such asset management companies are welcome as they play a major role in preserving investor confidence in the stock.
We also believe that First Republic Bank’s diverse revenue stream and sturdy capital position augur well for investors. Capital deployment efforts also bode well and boost investors’ confidence. Yet, the unsettled economic environment, low interest rate and stringent regulatory issues are matters of concern.
First Republic Bank currently retains its Zacks #2 Rank, which translates into a short-term Buy rating.