Nov. 5 (Bloomberg) -- Canadian Imperial Bank of Commerce, whose U.S. investment bank has had $2.6 billion in writedowns since 2005, is shedding most of its U.S. businesses to lower risk, analysts say.

Canada's fifth-largest bank said late yesterday it agreed to sell part of its New York-based investment bank to Oppenheimer Holdings Inc., a boutique investment bank. The sale includes the U.S. investment banking, equities, and leveraged finance businesses. CIBC is also selling its investment bank in Israel and other units in the U.K. and Hong Kong.

``This transaction substantially reduces its exposure to the areas of the business that have historically plagued CIBC's results,'' Dundee Securities analyst John Aiken said today in a note to clients.

Chief Executive Officer Gerald McCaughey has sought to reduce risk since 2005, when Toronto-based CIBC set aside $2.4 billion to settle claims from investors of failed energy trader Enron Corp. In August this year, CIBC recorded a C$190 million ($204 million) writedown from investing in securities tied to U.S. mortgages. CIBC will have more writedowns in the fourth quarter from mortgage-backed investments, the bank has said.

CIBC shares rose 10 cents to C$98.20 at 4:10 p.m. on the Toronto Stock Exchange. Oppenheimer rose $3.99, or 9.4 percent, to $46.24 on the New York Stock Exchange, the biggest gain in almost three months.

Keeping Businesses

CIBC will keep its U.S. businesses that offer real estate financing, merchant banking, oil-and-gas advisory, structured products and some debt operations. McCaughey said today in a conference call that the sale allows CIBC to ``redeploy capital'' for its Canadian, U.S. and international operations. He said an acquisition is ``improbable.''

``The environment is one that has proven to be both fairly unpredictable and has had a deteriorating element to it that has proceeded at a pace that has been somewhat surprising,'' he said on the call.

Oppenheimer will pay CIBC a combination of cash, shares and debentures, payable on the fifth anniversary of closing. As part of the agreement, CIBC will lend Oppenheimer $100 million to support trading operations and up to $1.5 billion in credit to help finance loan underwriting.

Oppenheimer will pay CIBC an amount based on the performance of the businesses between 2008 and 2012, with $25 million guaranteed, plus warrants for 1 million shares at $48.63 each at the end of five years. The sale is scheduled to close Jan. 2 subject to approvals, with a later closing date for the overseas businesses.

Merger Advice

The CIBC World Markets investment bank ranks 17th for U.S. stock sales this year, with 15 transactions worth $828 million, according to data compiled by Bloomberg. CIBC ranks 15th this year for announced U.S. mergers, with 56 takeovers worth $66.6 billion, according to Bloomberg data.

The businesses Oppenheimer is buying have annual revenue of about $400 million and employ more than 700 people, Oppenheimer said. CIBC has approximately 1,300 employees in the U.S., which mainly support the investment-banking business.

``The fact that 30 percent of the World Markets headcount was providing just 14 percent of the revenue speaks to the negative impact on efficiency that the U.S. capital markets business has had on CIBC,'' Merrill Lynch analyst Sumit Malhotra said in a note to clients. He rates CIBC a ``buy'' and doesn't own the stock.

Staff Affected

CIBC bankers affected by the sale may include Charles Holmes, head of U.S. equities; Andrew MacInnes, co-head of U.S. equity capital markets; and John Parks, head of U.S. equity research. Analysts include John Glass, who covers restaurants, and Meredith Whitney, whose downgrade of Citigroup Inc. last week triggered the stock's steepest retreat since September 2002.

CIBC will record one-time costs of about C$50 million, or 10 cents a share, for asset write-offs and severance packages from the sale, Chief Financial Officer Tom Woods said in the call. CIBC will also record C$100 million in the first quarter and C$25 million for the rest of fiscal 2008 for severances and other sale costs. CIBC reports fourth-quarter results on Dec. 6.

The transaction reverses most of CIBC's U.S. expansion. The bank bought Oppenheimer & Co. in 1997, and then sold the private client and asset management businesses to Fahnestock Viner Holdings Inc. in 2003. Fahnestock Viner changed its name to Oppenheimer Holdings in September that year. CIBC also closed Amicus, an online-banking business, in 2002.

Visa Gain

CIBC will report a ``large gain'' in the fourth quarter from the restructuring of the Visa Inc. credit-card network, Woods said. That gain will exceed writedowns from mortgage- backed securities, he said.

CIBC will also have a ``modest reorganization'' of some of its investment banking operations, CIBC World Markets CEO Brian Shaw said in the call. The bank is ``constraining'' activities tied to mortgage-backed securities such as collateralized debt obligations.

``We've decided that the business prospects in that area are going to be limited,'' Shaw said. ``We intend to move forward on a narrowed, or restricted basis and the focus currently is on management of existing risks.''

(CIBC has an archived presentation on this transaction on its Web site at www.cibc.ca under the investor relations section.)

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

Last Updated: November 5, 2007 16:38 EST