Dominion Bond Rating Service is reaffirming its ratings for Bank of Montreal in the wake of BMO’s acquisition of the Guardian funds.

BMO is buying the Guardian Group of Funds for $180 million. Guardian is the 28th largest mutual fund company in Canada by assets under management, measured at the end of March. It will add about $2 billion to BMO’s $28 billion in total assets under management.

DBRS notes that the acquisition will provide BMO with an additional sales force and products, expanding BMO’s distribution channel and product offering in wealth management. “Given the size of the transaction, and BMO’s capabilities in mutual funds in Canada, this transaction does not materially alter the company’s overall risk profile to warrant an adjustment to the company’s long-term and short-term credit ratings.”

DBRS says that the acquisition is consistent with BMO’s ongoing development of its wealth management businesses. It also says that the price appears reasonable, with BMO paying 9% of assets under management. DBRS expects most of the purchase price to be allocated to intangibles and goodwill.

BMO will issue 4.96 million common shares to pay for the deal. “The impact on Tier 1 capital should be relatively neutral as the higher amounts of intangibles and good will are offset with an additional issue of common equity.”

Integration is expected to be reasonable given that it is an in-market acquisition. The transaction is expected to close in the middle of summer 2001, subject to regulatory and Guardian Capital shareholder approval.