“Citing the need to focus its brokerage business on wealthy investors, Merrill Lynch & Co. said it is in talks with potential bidders for its Canadian brokerage operation,” writes Elena Cherney in today’s Wall Street Journal.

“The company said in a memo that it is considering selling the 2,300-employee private-client business as part of its move to focus its international ‘retail,’ or individual-investor, business on ‘wealth management, trust services and private banking services for the high net-worth market.’ “

“Merrill plans to keep its 1,200-employee institutional and investment-banking operation in the country, the company told Canadian employees in a memo on Tuesday.”

“The move was expected. Merrill’s new president, E. Stanley O’Neal, has launched a massive examination of the firm’s business units, and has been eyeing cuts in the firm’s brokerage operations in Canada, Australia and Japan. The firm’s Canadian brokerage operations is the first business to be identified for possible sale, people inside the company say. So far, Merrill has been approached by several potential suitors for its Canadian retail business and is in talks with more than one, said spokesman Guy McKanna.”

“He said Merrill, which has been looking to trim nearly $2 billion a year in annual expenses, has no plans to walk away from the business if the talks fail.”

“Canada’s five big banks, which all have brokerage operations, are viewed as the most likely bidders for the Merrill business. ‘Most of the Canadian banks have indicated for several months that they’re interested in expanding their retail wealth-management operations, and most of the strategy has revolved around adding incremental brokers,’ said Heather Wolf, who covers Canadian financial services for Goldman Sachs. Merrill’s Canadian private-client group includes 1,000 brokers, Mr. McKanna said.”

“Toronto-Dominion Bank and Bank of Nova Scotia were touted as likely to be particularly interested in the Merrill assets, since both banks lack the kind of scale in the retail business to compete with market leaders Canadian Imperial Bank of Commerce and RBC Financial Group, formerly known as Royal Bank of Canada. Both Canadian Imperial and RBC could face regulatory hurdles if they tried to add 1,000 brokers to their existing networks, said Robert Wessel, a banking analyst with National Bank of Canada.”

“Spokesmen for all five banks refused to comment on the Merrill retail business.”

“Merrill left the Canadian retail scene during the 1990 slowdown, only to return in 1998 with the acquisition of Midland Walwyn Inc. for $855 million. At the time, Midland Walwyn was Canada’s biggest independent brokerage firm, and Merrill Lynch paid top dollar for the deal.”