Blue Sky Asset Management has agreed to being taken over by the US investment bank Incapital as part of a strategy to broaden the former’s structured product offerings.

Under the terms of the deal - terms of which were not set out - Blue Sky will be merged into the structured product specialist's London-based subsidiary, Incapital Europe.

The deal was initially mentioned in a number of media reports earlier today. Blue Sky later confirmed the agreement in a press release. 

According to its website, Incapital is a securities and investment banking firm with offices in Chicago, Boca Raton and London. Incapital underwrites and distributes fixed income securities and structured notes through more than 900 broker-dealers, banks and institutional accounts in the US, Europe and Asia. The website did not mention the Blue Sky deal.

All of Blue Sky's previous book of plans will be transferred over to Incapital and will have ongoing service to maturity and beyond.

The structured product market has been gradually recovering since the sector was hammered by the collapse of Lehman Brothers, a key player in this market, in the autumn of 2008. Lehman provided some of the capital guarantees to these products, and its bankruptcy highlighted the issue of counter-party risk.

Investors' contracts are unaffected by the Incapital/Blue Sky deal and Incapital will take on the responsibility to provide services to independent financial advisors. Advisors and investors will also be able to deal with familiar Blue Sky staff and systems.

"The combination of Incapital and Blue Sky creates a leading global independent platform for fixed income and structured investments. Incapital Europe’s clients will immediately benefit from the significant scale and capabilities of the combined business units,” said Incapital president John Radtke.

“Incapital Europe will announce initiatives in the UK, Channel Islands and Continental Europe, bringing an expanded list of major banking counterparties, educational resources for professional advisers and building on the exceptional reputation that both firms have for client-centric innovation," he said in a statement. 

Blue Sky chief executive Chris Taylor, who will be managing director at Incapital Europe, reportedly has said that the company decided to look for a partner after a strategic review last year, following the collapse of Lehman and the demise of some other firms.

“UK wealth managers and professional advisors understand the benefits of dealing with independent structured investment providers – not least the advantages and value of open architecture counterparty platforms. However, it’s a simple fact that the independent firms active in the UK have lacked the capability and capital to operate at the highest level – or to satisfy the increasingly deep due diligence processes and requirements of advisors and investors," he said in the statement today.

"This trans-Atlantic deal creates an independent provider capable of competing at the highest level. Incapital Europe will immediately occupy a market leadership position, leveraging significant counterparty and trading advantage, with genuine scale, depth of resource and capability," he added.