Canada's CIBC said on Sunday it would sell a major part of its U.S. capital markets business to Oppenheimer Holdings Inc as it focuses on its core operations.

The businesses to be acquired by Oppenheimer employ over 700 people and had annualized revenues of about $400 million, Oppenheimer said.

The businesses to be sold include CIBC World Markets' U.S. investment banking, institutional sales, corporate syndicate lending, options trading, and part of the debt capital markets business. Other units being sold include related operations located in the UK, Israel and Hong Kong.

CIBC said it would keep its other U.S. wholesale businesses, which include real estate finance, equity and commodity-structured products, merchant banking and oil and gas advisory, as well some of its U.S. debt capital markets, Asia and British businesses.

It will also permit CIBC to redeploy capital over time to further support the continued growth of our strong and profitable U.S. and international operations, as well as our core Canadian businesses, said CIBC President and Chief Executive Gerry McCaughey.

CIBC will also maintain its corporate lending capability and its ability to distribute Canadian equities and fixed income products in the United States and international markets on behalf of its Canadian clients.

For the U.S. businesses, the proposed transaction is expected to close in January 2008. The international operations will close on a different, undisclosed date.

CIBC does not expect the proposed transaction to have a material impact on its earnings per share.

Under the terms of the deal, CIBC will receive a deferred payment on the fifth anniversary of closing based on the performance of Oppenheimer's combined capital markets business over that five-year time period.

That deferred payment will be no less than $5 million a year, Oppenheimer said. CIBC will also receive warrants exercisable for one million Oppenheimer shares at $48.63 per share, Oppenheimer said.

As part of the transaction, Oppenheimer will borrow $100 million from CIBC in the form of a subordinated loan. In addition, CIBC will provide a lending, initially up to $1.5 billion, to a newly formed Oppenheimer U.S. entity to finance and hold the syndicated loans for U.S. middle market companies.

(Reporting by Jessica Hall)