CIBC has agreed to sell to Oppenheimer Holdings Inc. its U.S. domestic investment banking, equities, leveraged finance and related debt capital markets businesses. The transaction also includes CIBC's Israeli investment banking and equities business, and certain parts of other U.S. capital markets-related businesses located in the UK and Asia.
CIBC will retain its other U.S. wholesale businesses, which include real estate finance, equity and commodity structured products, merchant banking and oil and gas advisory, as well as the balance of its U.S. debt capital markets, Asia and U.K businesses.
CIBC will also maintain its corporate lending capability and its ability to distribute Canadian equities and fixed income products in the U.S. and international markets on behalf of its Canadian clients.
Under the terms of the agreement, CIBC will receive a deferred payment on the fifth anniversary of closing based on the performance of Oppenheimer's combined capital markets business over that five-year period. CIBC will also receive warrants exercisable for one million Oppenheimer shares at the end of the five year period.
As part of the transaction, Oppenheimer will borrow $100 million from CIBC in the form of a subordinated loan. In addition, CIBC will provide a warehouse facility, initially up to $1.5 billion, to a newly formed Oppenheimer U.S. entity to finance and hold the syndicated loans for U.S. middle market companies. Underwriting of loans pursuant to the warehouse facility will be subject to joint credit approval by Oppenheimer and CIBC.
"This transaction gives CIBC the opportunity to benefit from Oppenheimer's future success," said Gerry McCaughey, CIBC's President and Chief Executive Officer. "It will also permit CIBC to redeploy capital over time to further support the continued growth of our strong and profitable U.S. and international operations, as well as our core Canadian businesses. This is in line with our strategic imperative to achieve consistent and sustainable performance over the long-term."
Albert Lowenthal, Oppenheimer's CEO, said: "We are pleased to once again be partnering with CIBC and believe that the combination of these resources will significantly increase Oppenheimer's penetration in capital markets. The firm is now positioned to service clients with a complete offering of capital markets services, including M&A advisory, equity underwriting, high-yield fixed income origination and loan syndication. The timing of this acquisition will permit us to gain market penetration at a time that other firms are pulling back. We look forward to working with our associates both new and old in making this a success."
For the U.S. businesses, the proposed transaction is expected to close in January 2008, subject to regulatory approvals. A second closing is anticipated for the overseas operations, including the Israeli broker-dealer. CIBC does not expect the proposed transaction to have a material impact on its earnings per share or Tier 1 capital ratio, either at closing or on an ongoing basis.
CIBC World Markets is the wholesale and corporate banking arm of CIBC, providing a range of integrated credit and capital markets products, investment banking, and merchant banking to clients in key financial markets in North America and around the world. We provide innovative capital solutions and advisory expertise across a wide range of industries as well as top-ranked research for our corporate, government and institutional clients.
Oppenheimer Holdings, through its principal subsidiaries, Oppenheimer & Co. Inc. (a U.S. broker-dealer) and Oppenheimer Asset Management Inc., offers a full range of services from 81 offices in 21 states and through local broker-dealers in 2 foreign jurisdictions. The Company offers trust and estate services through Oppenheimer Trust Company. Evanston Financial Corporation is engaged in mortgage brokerage and servicing. In addition, through its subsidiary, Freedom Investments, Inc. and the BUYandHOLD division of Freedom, the Company offers online discount brokerage and dollar-based investing services.
CIBC will hold an analyst/investor/media call to discuss this announcement on November 5 at 2 p.m. (EST). A live audiocast will be available in English and French at www.cibc.com, About CIBC. Participants can also listen to the conference call in English (416-641-6139 in Toronto, or toll-free 1-866-299-6657 throughout the rest of North America) and French (514-861-4190 or toll-free 1-877-580-3850 throughout the rest of North America). CIBC World Markets
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