Wells Fargo (NYSE:WFC) is set to add EverKey Global Partners to its list of boutique investment offerings for institutional clients by the end of the year. ((Wells Fargo and EverKey Global Partners announce definitive acquisition agreement, Wells Fargo Press Releases, Dec 15 2011)) The bank announced that it has signed a definitive acquisition agreement with EverKey, which specializes in global equity strategies. The acquisition will add to the strength of Wells Fargo’s asset management business, which accounts for around 20% of our analysis for Wells. As the fourth largest U.S. bank in terms of assets, after JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC) and Citigroup (NYSE:C), Wells Fargo has been pursuing a multi-boutique business model, having added several specialized investment boutiques in the recent past.
We maintain a $30 price estimate for Wells Fargo’s stock, and attribute the 15% premium to the current market price to the pessimistic outlook for banking stocks in the wake of economic slowdown and deteriorating European debt crisis.
Our analysis of Wells Fargo shows that the bank’s asset management business contributes slightly less than a fifth of its total value. The asset management business manages assets worth more than $449 billion, largely through its Wells Capital Management and Wells Fargo Funds Management units. The bank also has several boutique investment units which include European Credit Management, Galliard Capital Management (stable-value manager) and Golden Capital Management (quantitative manager).
EverKey Global Partners, with offices in New York and the Bahamas, is a team of 11 members with about $215 million in assets under management. While the acquisition will do little to add to Wells Fargo’s huge asset base, it will allow Wells Fargo to provide customized global equity strategies to its institutional clients. We expect the deal to slightly increase the bank’s asset management commission income over the years.