State Street Corp. is making its largest acquisition since 2007 to become even larger and more international in one of its core businesses, investor services.
In a company focused on greater scale and efficiency, the company’s $ 3.5 billion acquisition of Brown Brothers Harriman (BBH) ‘s investment services unit will add $ 5.4 trillion to its $ 31.9 trillion deposit assets, making State Street Corp.
a leader in investor services.
This means that the scope of State Street as a custodian of funds, fund accounts, and shareholder records is expanding. BBH’s business and its 4,800 employees will add to State Street a larger presence in Japan, the Middle East and Latin America, and more accounts for foreign currency lending.
Despite these longer-term gains, State Street shares fell 3% on Tuesday after the company announced it would issue ordinary shares and suspend share repurchases until 2022 to help pay for the deal.
The acquisition will also help State Street develop its State Street Alpha technology offering, which began with the 2018 acquisition of Charles River Development for $ 2.6 billion. BBH Investor Services’ technology enhances State Street Alfa as it positions itself as a “front-to-back” asset management platform, State Street said.
“BBH Investor Services offers well-established data communication tools, the Infomediary brand, which allows us to automate and integrate customer data more smoothly,” the company said.
For State Street, the acquisition is the largest deal since the 2007 acquisition of Investors Bank & Trust for $ 4.5 billion.
Under the transaction, Sean Páircéir, who is currently BBH’s partner and global head of investment services, will become a member of the State State Management Committee.
Among the key figures in the Wall Street investor deal, State Street said BBH Investor Services would add $ 1.4 billion in revenue and $ 300 million in pre-tax revenue to its company. State Street plans to achieve approximately $ 260 million in cost synergies with the transaction.
State Street also plans to issue equity and suspend the purchase of shares until the second quarter of 2022 to help pay for the acquisition.
According to the company, BBH’s business will add about 1% to its pre-tax margin to about 31%.
The purchase does not include BBH’s private banking and investment management.