BMO Capital Markets, the investment banking arm of the Bank of Montreal, has acquired the Chicago-based broker-dealer Griffin, Kubik, Stephens & Thompson Inc., further expanding into the U.S. public finance market.

BMO becomes the sixth-largest bank qualified municipal bond dealer - for original issue sizes of $10 million or less - in the United States, and the largest in Illinois, according to the firm.

"We are excited because this solidifies ourselves as the number one bank qualified dealer in Illinois," said Charlie Piermarini, head of debt products and securitization for BMO Capital Markets. "This also puts us in a very competitive manager position nationally."

BMO also owns the Chicago-based retail banking operation, Harris NA. Between Harris and Griffin Kubik, two of the top 100 municipal senior managers in the country are now under one roof. In 2007, Harris wrote $625.4 million through 132 deals, while Griffin Kubik wrote $484.1 million through 87 issues. The two firms ranked 49th and 60th respectively.

With the acquisition, BMO gains control of Griffin Kubik's distribution network throughout the Midwest. The boutique firm has established business and clients in municipals and taxable fixed income products, through trading, underwriting, portfolio analysis, and credit research, according to a release.

"We have been looking for ways to strengthen our franchise," Piermarini said. "One of the key attractions for us was the strong distribution platform."

Piermarini said the acquisition makes sense for BMO because of Griffin Kubik's strong client-driven business, which generates steady profits without the need for high amounts of capital.

In many cases, Griffin Kubik and Harris will be able to leverage relationships to make both of their businesses stronger, he said. For example, Griffin Kubik has offices in Milwaukee, which will be used to build upon the business already developed in the state by Harris.

This is just the latest expansion efforts announced by BMO which exhibit the banking group's commitment to the U.S. public finance market. In February, BMO hired five municipal salesmen and traders from LaSalle Financial Services in Chicago.

He is hoping that BMO can use Griffin Kubik to build upon its Canada-based infrastructure finance expertise.

"We think [infrastructure finance] will pick up significant momentum over the next few years in the US," Piermarini said.

When the deal is closed, the Griffin Kubik name will be dropped and those business lines placed under the BMO Capital Markets brand, Piermarini said.

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