Ameriprise Financial Inc. said it plans to buy the long-term asset-management business of Bank of America for about $1 billion cash in a deal the U.S. financial planning and life insurance company said will greatly expand product distribution.

The acquisition of Boston-based Columbia Management will create a business with nearly $400 billion in global assets under management and become the eighth-largest manager of long-term mutual funds in the United States, Ameriprise (NYSE: AMP) said.

Paul Johnson, a spokesman for Ameriprise, said the acquisition would be the biggest for the company since it spun off from American Express in 2005.

The deal also includes a five-year distribution agreement that offers access to clients of Bank of America's affiliated distributors, including U.S. Trust, Ameriprise said.

The combined business will allow Ameriprise to serve a variety of investors -- retail, high net worth and institutional, said Jim Cracchiolo, chairman and chief executive officer of the Minneapolis-based Ameriprise, in a statement

The business, to be based mostly in Boston, will operate under the Columbia Management brand. The Columbia Wanger and the Acorn funds will keep their brands, while Ameriprise will keep the RiverSource brand for its insurance and annuities businesses and some institutional and mutual funds.

The acquisition, which requires regulatory approvals, is expected to close during the spring of next year. Under the deal, Ameriprise will pay between $900 million and $1.2 billion based on the net asset flows at Columbia before closing.

"We were able to pursue this compelling opportunity in large part because of the strength of the company and our capital position, which we maintained through the very challenging market conditions of 2008 and early 2009, and which we supplemented in June," Cracchiolo said in the statement.

Earlier this year, Ameriprise received approval from the U.S. Treasury Department to receive federal bailout funds under the Capital Purchase Program, but the company declined the government's financial aid (BestWire, May 15, 2009).

Ted Truscott, president of U.S. asset management, annuities and chief investment officer for Ameriprise, will lead the combined U.S. asset management business.

On the news of the deal, A.M. Best Co. affirmed the financial strength rating of A+ (Superior) and the issuer credit ratings of aa- of the key insurance subsidiaries of Ameriprise, RiverSource Life Insurance Co. and its wholly owned subsidiary, RiverSource Life Insurance Co. of New York (BestWire, Sept. 30, 2009).

The vast majority of the purchase price was pre-funded by Ameriprise?s July 2009 common stock offering, which yielded $868.5 million in net proceeds, A.M. Best said.

As of June 30, Columbia managed about $93 billion in equities and $72 billion in fixed-income assets, Ameriprise said. The cash business Columbia manages isn't included in the transaction.

On the afternoon of Oct. 2, Ameriprise's stock was trading at $37.31 a share, up 0.89% from the previous close.