Nuveen plans to acquire U.S. Bancorp's FAF Fund

Nuveen Investments Inc., the asset manager owned by Madison Dearborn Partners LLC, agreed to buy the stock and bond funds of U.S. Bancorp's FAF Advisors unit for $80 million in cash and a 9.5 percent stake in Nuveen.

Nuveen, the largest manager of closed-end funds, will get $25 billion in investments from FAF Advisors, which runs the First American family of mutual funds, the Chicago-based company said today in a statement. Nuveen will manage $175 billion when the transaction is completed this year. U.S. Bancorp will hold on to about $62 billion in assets in money funds.

The transaction is the latest in a series of acquisitions that expanded stock and bond operations at Nuveen, which was taken private in 2007 by Chicago-based Madison Dearborn. Nuveen in 2008 bought growth-stock manager Winslow Capital Management, which followed purchases of Santa Barbara Asset Management and Symphony Asset Management earlier in the decade.

The combination will create "stronger, more diversified mutual-fund offerings for the investors and advisers we serve," said John Amboian, Nuveen's chief executive officer, in the statement.

Tom Schreier, chief executive officer of Minneapolis-based FAF Advisors, will be vice chairman of wealth management at Nuveen Investments. Bill Huffman, co-head of Nuveen Asset Management, a municipal bond unit that oversees about $75 billion, will be president of the combined businesses.

Closed-End FundsIn addition to closed-end funds, Nuveen oversees municipal bonds and stocks and owns NWQ Investment Management and Tradewinds Global Investors.Standard Poor's Ratings Services said today's agreement with Minneapolis-based U.S. Bancorp doesn't change the long-term corporate credit rating on Nuveen of B-, or six levels below investment grade, with a stable outlook. Moody's Investors Service raised its outlook for Nuveen to "positive" from "stable," while leaving its credit rating at Caa1.U.S. Bancorp, the nation's fifth-biggest bank, didn't disclose a value for the Nuveen stake it's receiving. Nuveen's shareholder equity at the end of December was $969 million, according to Bloomberg data.FAF Advisors is one of five parts of U.S. Bancorp's wealth- management segment, which contributed about 17 percent of the bank's net income in 2009, according to company reports and Bloomberg data.Lack of Scale"We determined that we did not have the scale and distribution necessary to appropriately grow the long-term asset-management business," U.S. Bancorp spokeswoman Teri Charest wrote in an e-mail. "The opportunity to sell the business to Nuveen while maintaining an equity stake was an attractive alternative."The transaction is too small to be material to U.S. Bancorp's financial statements or to its measurements of capital for bank regulators, according to Charest.U.S. Bancorp declined 3 cents to $23.94 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has gained 6.4 percent this year.