Bank of Montreal has confirmed it's offering to buy U.K.-based F&C Asset Management PLC in a cash deal valued at $1.3 billion, a move that will diversify and grow BMO's wealth management arm.

The friendly deal is being supported by the U.K. company's board but will require shareholder and other approvals. The companies expect the deal to close after May 1.

"The acquisition demonstrates BMO's deep commitment to the asset management business," said Bill Downe, chief executive officer of BMO Financial Group.

"With an established pedigree in fixed income investment and broad equity and property capabilities across its European platform, F&C advances BMO's capabilities by adding scope and scale to our well-established portfolio of wealth management businesses."

F&C Asset Management PLC revealed on Monday that it was in advanced discussions with the Canadian bank. They announced the deal Tuesday, before North American markets opened.

Bank of Montreal is offering 120 British pence, or about $2.21 at current exchange rates, for each share of F&C — about 28 per cent above the stock's closing price last Friday.

"F&C's board of directors believes the offer represents an attractive valuation for F&C shareholders and a positive outcome for employees and clients," said Kieran Poynter, chairman of F&C, in a joint statement with BMO.

Bank of Montreal says it expects "modest" cost savings from the acquisition.

"We look forward to welcoming F&C clients and employees to the BMO Global Asset Management family," said Barry McInerney, co-CEO of BMO Global Asset Management.

Once combined, BMO Global Asset Management and F&C would have US$269 billion of assets under management.