RHJ International is to buy UK wealth management unit Kleinwort Benson from Commerzbank for 225 million pounds ($359.5 million), the latest in a flurry of private banking sales.

The transformational deal, which lifted RHJ shares 8.5 pct, comes on the heels of the sale by Dutch bank ING of private banking units in Asia to Singapore's OCBC and in Switzerland to Julius Baer.

Brussels-listed RHJ, a diversified investment company which failed to buy GM's GM.UL car unit Opel last month, aims to make a push into financial services through the purchase, and would contemplate more acquisitions, bank executives said.

RHJI plans to adopt Kleinwort Benson as an overarching brand for its financial services businesses going forward, RHJI Chief Executive Leonhard Fischer, a former Dresdner Bank executive, said in a statement.

Wealth management operations are attractive buys for banking groups thanks to steady income streams that can offset more volatile capital markets units.

A number of private banking units have also come up for sale as banks restructure following state bailouts and meet competition requirements attached to mergers.

KBC Securities said the deal, the biggest since RHJ's flotation in 2005, was the transformation purchase the market had been waiting for, and was fixed at a fair price of some 4.2 percent of end-2008 assets under management.

RHJ will buy both Kleinwort Benson Channel Islands Holding Ltd and Kleinwort Benson Private Bank Ltd, with combined wealth assets under management of 5.4 billion pounds and fiduciary assets under administration totaling 15.7 billion pounds.

They employed around 650 staff at the end of last year.

PUSH INTO FINANCIALS

Kleinwort Benson Chief Executive Robert Taylor told Reuters the drive by RHJ to build a financial services business was likely to involve further acquisitions.

They want to be active in the wealth management space and actually plan to build up Kleinwort Benson as a merchant bank and try to put some other financial services companies under its ownership, he said.

The deal with RHJ is expected to close in the first quarter of 2010, subject to approval by regulators.

Taylor also said RHJ had beaten a private equity-backed management buyout bid and bids from five trade buyers.

They (RHJ) came into the second round but it became clear they were probably the best option and our ambitions dovetailed very well with what RHJ wanted to do, he said.

For RHJ, which has a variety of Japanese and auto parts assets, most of which need restructuring, the acquisition fits with its announced strategy of pushing into European finance, and is its first major purchase since 2006.

RHJ shares were up 8.7 percent at 5.27 euros at 0946 GMT while Commerzbank's were 1.2 percent higher at 8.79 euros. The DJ Stoxx European banking index was 0.6 percent higher .SX7P.

Bank Degroof raised RHJ to 'buy' from 'accumulate' and said the deal should lead to significant cost synergies.

Kleinwort Benson is a unit of Dresdner Bank that Commerzbank bought this year. RHJ board member Gerd Haeusler was its chairman from 1997 to 2000.

The European Commission had demanded the sale of the unit as a condition for approving aid to Commerzbank from German bank rescue fund Soffin. Commerzbank has also sold wealth management operations in Belgium and Switzerland.

Soffin has granted 18.2 billion euros ($27.12 billion) worth of assistance to the lender, which was hit by the financial crisis and its takeover of Dresdner Bank.

Commerzbank said its investment banking business remained unaffected by the transaction.

($1=.6710 Euro)

($1=1.017 Swiss Franc)

(Reporting by Chris Vellacott, Jonathan Gould, Philip Blenkinsop, Chris Wickham; editing by Simon Jessop)

United kingdom Investment Commerzbank