$1 billion buys 41 percent stake in American Century Investments

Tokyo-based Nomura agreed Monday to pay approximately $1 billion for a 41 percent stake in Kansas City-based American Century Investments.

The stake currently is held by Toronto-based Canadian Imperial Bank of Commerce, or CIBC, which had purchased the ownership from U.S.-based JPMorgan Chase & Co. in 2011 for $848 million.

American Century, a mutual fund and investment management company, is controlled by the Stowers Institute for Medical Research.

The institute’s control was part of the reason CIBC decided to sell.

“Recognizing that a path to control was not going to be available over time, we made the decision to work with ACI (American Century) to monetize our investment,” Victor Dodig, CIBC president and chief executive officer, said in an announcement of the deal.

CIBC had bought its stake with the understanding that it would remain in a minority ownership position, said Jonathan Thomas, president and chief executive of American Century. Over time, he said, CIBC’s interest in control grew and it raised the question this spring.

The Stowers Institute, however, isn’t relinquishing its controlling stake. Its 45 percent economic interest earns it dividends from American Century, equal in recent years to about a 6 percent return, Thomas said.

“All of their life-saving research is funded off our earnings, from their ownership,” Thomas said.

CIBC’s 41 percent state also receives dividends from American Century, but CIBC’s shares carry only a 10.1 percent voting stake. The Stowers Institute’s shares give it a controlling vote.

Without a path to control, CIBC agreed to sell, and American Century sought a buyer, settling on Nomura, Thomas said.

CIBC and American Century’s business relationships will continue. These have added about $5 billion in assets under management at American Century as CIBC offered American Century products in Canada.

Nomura similarly will open the door to Japan’s market for American Century products, Thomas said.

Nomura is a leading global financial services group with a 24 percent share of Japan’s investment market. Nomura has operations in more than 30 countries, including the United States.

Thomas said success in Japan could boost employment at American Century, which has about 1,300 employees, including about 1,000 in Kansas City.

The companies expect to complete the sale in the first half of next year. The sale requires regulatory approval.

“We welcome Nomura as a new strategic partner in the ownership of American Century and look forward to a long and successful relationship,” Richard W. Brown, who is chairman of the both the Stowers Institute and American Century, said in the announcement.

James E. Stowers Jr., who died in 2014, had founded American Century in 1958 as Twentieth Century Mutual Funds and co-founded the Stowers Institute with his wife, Virginia, in 1994.

Sale of the partial stake in American Century to JP Morgan in 1997 had generated key funding for the Stowers Institute’s formation and its endowment.

At the time, American Century had $60 billion in client assets. It had just short of $150 billion at the end of November.

This story was originally published December 21, 2015 at 9:29 AM with the headline "$1 billion buys 41 percent stake in American Century Investments."