McDonald Investments Inc. has gone the way of Salomon Smith Barney, PaineWebber, and Dean Witter -- just a few names that have vanished from Muniland through merger or acquisition.
On Monday, KeyCorp -- which sold 51 retail offices of its former broker-dealer arm to UBS Securities LLC for $171 million earlier this year, according to KeyCorp's quarterly earnings statement -- has renamed what was left of McDonald Investments. UBS incorporated McDonald into its wealth management group in February, and the unit has been operating under its corporate name since then.
KeyCorp retained its tax-exempt institutional operations and has moved its retail business to branch offices under KeyBanc Capital Markets, a subsidiary of KeyCorp. KeyBanc Capital Markets, along with the firm's public finance, investment banking, mergers and acquisitions and equity research, will take over the operations McDonald once conducted, said KeyCorp spokesman Bill Murschel.
"We have a considerable wealth management and private banking business already, so we will conduct that business via our branches," Murschel said. "We will just be doing it with Key bankers, not McDonald ones."
The sale was first announced in September 2006, but the scope of the acquisition was unclear until the deal closed last month. Notably, the sale was initially announced as an "up to" $280 million transaction. The price tag cheapened as it became clearer which parts of the broker-dealer would move to UBS.
UBS declined to comment for this story. However, in a release from last month, the firm announced the acquisition of the branch network was complete and that those offices would be integrated into UBS Wealth Management.
KeyBanc announced Monday that the name McDonald Investments Inc. would no longer be used. Yesterday, KeyCorp reported in its quarterly earnings statement that the McDonald Investments branch would have reflected tax equivalent total revenue of $193 million in the first quarter if still part of the firm. This amount does not include the revenue gained from the sale itself. Net income for the first quarter of 2007 totaled $350 million for KeyCorp.
Based in Cleveland, McDonald oversaw 165,000 accounts and had total client assets of approximately $30 billion. It focused on providing wealth management services to affluent and high-net-worth individuals, including estate planning, retirement planning, and general asset management.
Murschel said that KeyBanc is continuing to serve its retail clients as well as provide underwriting services.
In 2006, KeyBanc Capital Markets was the senior underwriter for 36 issues, totaling $623 million of debt. This is up from 2005 when the bank underwrote 41 issues totaling $414.7 million.
Brokers and dealers have increased their municipal holdings in the last few years. In 2006, this sector held approximately $51 billion of bonds. In 2001, this same sector held only $19 billion.
Meanwhile, UBS has recently increased its presence in U.S. retail banking. Along with the McDonald acquisition, UBS also closed a deal to buy Piper Jaffray's private client services group, which maintained 90 wealth management offices, on Aug. 11, 2006. This transaction cost $500 million plus possible additional cash based on staff retention level. UBS also brought in Craig Walling as chief executive officer of the private bank group in February.
Turning to the banking side, UBS last year managed 716 issues totaling $40.1 billion of bonds, ranking second among senior managers. Top-ranked Citigroup Investment Banking managed 543 muni bond sales, totaling almost $53 billion. (c) 2007 The Bond Buyer and SourceMedia, Inc. All rights reserved. http://www.bondbuyer.com http://www.sourcemedia.com
