The Successful Investor Hotline – Friday, July 15, 2011

Article Excerpt

CANADIAN IMPERIAL BANK OF COMMERCE, $74.13, Toronto symbol CM, is buying 41% of U.S.-based American Century Investments, which sells mutual funds and wealth management services to institutional and individual investors. CIBC will have a 10.1% voting interest in this private company. The bank is paying $848 million U.S. for this investment. That’s equal to 1.2 times the $678 million (Canadian), or $1.60 a share, that CIBC earned in its second fiscal quarter, which ended April 30, 2011. The purchase should close by the end of October 2011, and add $0.15 a share to CIBC’s fiscal 2012 earnings. American Century has $112 billion U.S. in assets under management, so this purchase looks like a bargain for CIBC. That’s largely because American Century’s founder will still hold a majority stake in the company. Even so, it’s likely that CIBC will eventually gain control of this business. The purchase also lets CIBC offer other financial services to American Century’s high-quality clientele. CIBC is a buy. RESEARCH IN…

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