Rod Kent, chief executive of Close, said that the acquisition, which is being funded by a pounds 45m share placing, will expand Close's existing fund management business and give it an established offshore banking and trust management business.
The deal will double funds under management to over pounds 2bn as well as giving Close a foothold in the specialist investment trust market. Rea has a well-respected stable of investment trusts specialising in areas such as technology and pharmaceuticals.
Mr Kent said: "The commercial logic is simple. We have wanted to expand our asset management business and that is basically what Rea is."
William Salomon, the Rea Brothers chairman, said the bank had been reluctant to abandon its independence. "However, scale is of increasing importance in our business."
Close Brothers shares rose 26.5p to 794p yesterday. To accompany the placing Close issued a forecast that profits for the year-end on 31 July will be at least pounds 75m, up from pounds 69.6m last year. Close is offering 95p a share, a premium of 65 per cent on the previous day's closing share price, or one new Close share for eight Rea shares.