CIBC is selling its U.S. private client and asset management divisions to TSX-listed brokerage firm Fahnestock Viner Holdings Inc.

Fahnestock, based in New York, has agreed to acquire the Oppenheimer Private Client and Asset Management divisions of CIBC World Markets Corp., for approximately US$257 million (CDN$401 million). The transaction is expected to close on January 2, 2003, subject to regulatory approval including the New York and Toronto Stock Exchanges. As part of the agreement, CIBC may acquire up to 35% of the issued shares of Fahnestock.

CIBC bought the Oppenheimer business back in 1997 for about US$525 million, paying US$350 million in cash on closing the deal, and another US$175 million over three years. Fahnestock intends to operate the acquired businesses under the name Oppenheimer & Co. The client accounts of both the retail business and the asset management business will be executed and cleared through Fahnestock & Co. Inc. commencing in the spring of 2003. In the period between closing and conversion of the client accounts, CIBC has agreed that the accounts will continue to be serviced by CIBC World Markets Corp. In addition, the financial consultants of the combined firm will have access to CIBC World Markets research.

This transaction pushes Fahnestock onto the list of the top 10 independent full service retail broker-dealers in the U.S., based on financial consultants and client assets.

“The combination of CIBC’s Private Client and Asset Management Divisions in the U.S. with Fahnestock will create an entity that has the scale and operational efficiencies necessary to be a strong wealth management competitor within the U.S. market,” said CIBC Wealth Management Vice Chair Gerry McCaughey. “By obtaining the right to acquire an interest in Fahnestock, CIBC will have an opportunity to participate in the future growth and operating leverage of this combined business.”

Fahnestock and CIBC also have a stakeholders agreement that gives CIBC permission to make an offer to acquire all of the outstanding shares of Fahnestock on terms that must be acceptable to a majority of Fahnestock’s independent directors, on the seventh and 10th anniversary of closing and upon certain other stipulated events.

CIBC would have the right to nominate two directors to Fahnestock’s board, It would also have a pre-emptive right to purchase Class A shares in future share issuances by Fahnestock.

Fahnestock has agreed that it would not divest itself of more than 50% of its brokerage business without the consent of CIBC, but it is not restricted from selling the entire business.