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UPDATE 5-Baer's Artio IPO raises larger than expected $650mln

Published 09/24/2009, 08:53 AM
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* Artio IPO prices at $26, top of range

* Ups number of shares sold by 9.3 percent

* Parent Julius Baer to give strategy update Sept. 25

* IPO proceeds of $650 mln to boost acquisition war chest

* Baer shares up 0.2 percent, outperform European peers

(Updates shares, writes through)

By Jason Rhodes and Phil Wahba

ZURICH/NEW YORK, Sept 24 (Reuters) - Julius Baer Holding AG's U.S. asset management arm Artio Global Investors Inc raised a greater than expected $650 million from its initial public offering, helping its parent build its acquisition war chest.

Artio priced its shares at $26 and sold 25 million of them, 9.3 percent more than expected. The shares will list in New York on Thursday, adding to a revival in IPO activity inspired by the stock market upturn.

"The Artio IPO is, in our view, well timed and takes advantage of a positive financial market environment," said analyst Stefan Schuermann at banking and asset management group Vontobel, who reiterated a "buy" recommendation on Baer.

Artio will use the money to repurchase 22.6 million shares from its parent, more than halving Julius Baer's stake.

Baer said its private banking unit would garner $300 million of the proceeds from the IPO, with the remainder to strengthen the buying power of hedge fund arm GAM, which is also set to be listed separately to the private bank.

If the IPO's managers, led by Goldman Sachs, exercise their option to buy another 3.75 million shares, the IPO could yield $747.5 million and become the third-largest U.S. IPO so far this year.

Baer, Switzerland's third-biggest bank, has often said it was planning to list Artio once equity markets steady and it decided earlier this month the time was right to cash in on higher share prices to help fund possible acquisitions.

The Artio IPO ends a 15-month drought in financial company flotations, excluding real estate investment trusts, in the United States. The last asset manager to go public there was Fifth Street Finance Corp in June 2008.

RENEWED ENTHUSIASM

Artio may have benefited from investors' renewed enthusiasm for asset managers. The Standard & Poor's Asset Management and Custody Banks index has rallied 102 percent from its March 2009 lows and JP Morgan last week raised price targets on five U.S. asset managers because of strong equity markets.

Artio, whose investment funds include the Artio International Equity Fund, had $53.3 billion in assets under management as of Aug. 31, according to a regulatory filing. Its revenue, mostly investment management fees, dropped 45.6 percent to $133.3 million in the six months ended June 30, 2009.

Artio's IPO is part of a wider streamlining of Baer, which is expected on Friday to reveal details of its plan to list its private bank and hedge fund arm GAM separately.

Outflows at GAM slowed in the first half, sparking optimism about its future performance, after concerns about the hedge fund industry led investors to withdraw billions of francs in assets from the unit.

Baer had been aiming to squeeze as much money out of the Artio listing as possible and build on an already sound capital base as a platform to expand its private bank.

"I think the allocation of the capital at Artio will have been driven by looking at opportunities," said ZKB analyst Andreas Venditti.

Baer said over the weekend it had looked at the private banking assets Dutch bank ING Group NV is putting up for sale and is open to discussing a deal.

Sources with knowledge of the deal told Reuters on Thursday Baer had dropped out of the race to buy ING's Asian private banking, but could still snap up Swiss assets.

"The other bidders are likely to be interested in the Asian assets but not the Swiss," Venditti said. "For Baer it would make sense to buy the Swiss business and realise ... synergies."

The extra money for GAM would boost its own ability to make acquisitions, Venditti added, noting current opportunities to buy asset managers, particularly in the United States.

Shares in Baer were trading up 0.2 percent at 57.15 francs by 1237 GMT, outperforming a flat DJ Stoxx European banks index. (Additional reporting by Lisa Jucca; Editing by David Holmes and David Cowell)

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