Merrill Lynch maintains buy recommendation for AGF

The $450 million deal is a positive for AGF shareholders, says Merrill. The additional $6.1 billion in assets under management will push AGF to number five in the mutual fund business.

The deal should accrete AGF’s earnings almost immediately, predicts Merrill, as management expects to wring a 70% cost savings from the deal. Further, AGF management has acquisition experience, after taking over the 20/20 Funds in 1997. During that deal AGF learned from some rough experiences. “Systems integration will be a priority here,” says a Merrill spokesman.

Merrill calculates that AGF paid 6.9% of its mutual fund assets. That’s less than AIM Fund Management Inc. recently paid for Trimark Financial Corp.