Hold - Price 37.70 on June 10
by Sandler O'Neill

Beverly Hills-based financial-services company City National announced an agreement to acquire a majority interest in Lee Munder Capital Group, a Boston-based asset manager. Lee Munder...utilizes a variety of investment strategies, including small-cap growth, small- and mid-cap value, global multi-cap, large-cap core, international equity and fixed income. We think the deal is a natural fit for City National, given that it continues to build out its wealth-management business. Lee Munder will merge with Independence Investments, a Boston-based institutional asset-management firm in which City National holds a majority interest, and will become City National's primary institutional asset-management affiliate. The combined asset manager will have [more than] $4 billion of assets under management and will operate under the Lee Munder Capital Group name as an affiliate of Convergent Capital Management -- the Chicago-based asset-management holding company that City National acquired in 2003. We see very little risk with the deal....With the addition of Lee Munder, City National will increase its assets under management to nearly $32 billion, and assets under administration to $49 billion-plus. Market cap: $1.9 billion.

City National (CYN) was downgraded from Outperform to Peer Perform, Bear Stearns said. Estimates also cut, following the company's disappointing quarterly report and forward guidance.

City National was downgraded from Neutral to Sell, Merrill Lynch said. Estimates also cut through 2009, because of potential Fed easing.

RONALD L. OLSON , age 65, has been a director of the Corporation since 1997. For more than the past five years, he has been a partner in the law firm of Munger, Tolles & Olson LLP. He is also a director of City National Corporation, Edison International and The Washington Post Company.

Upgraded by Friedman Billings from Underperform to Mkt Perform

Downgraded by Sun Trust Rbsn Humphrey from Buy to Neutral
Downgraded by Stifel Nicolaus from Buy to Hold