US custodian bank State Street Corp (NYSE:STT) said Friday that it would buy privately-held financial-data firm Charles River Development, for US$2.6bn in cash.
State Street plans to pay for the deal in part by canceling plans to buy back about US$950mln in company stock this year and issuing fresh equity to finance the deal.
The acquisition, which is subject to regulatory approvals, is expected to be completed in the fourth quarter of 2018. It has received a “conditional non-objection” from the Federal Reserve but will still need the Fed’s approval.
Burlington, Massachusetts-based Charles River runs a software platform used by more than 300 customers. It had revenue of more than US$300mln last year.
The acquisition will help State Street deliver a more comprehensive end-to-end buy-side platform and deliver more data and analytic tools to its asset-management clients.
“The synergy between our firms provides the market with a major new differentiating offering that will change the way the buy side operates,” Charles River CEO Peter Lambertus said in a statement.
“Today’s announcement represents an important milestone in our digital and technology transformation,” said State Street CEO Jay Hooley.
2Q earnings beat Wall Street estimates
State Street announced the Charles River agreement minutes before it reported second-quarter earnings that beat Wall Street estimates on a steady rise in revenue.
For the quarter ended June 2018, the custodian bank pulled out of a years-long rut of low revenue growth by posting earnings of US$2.05 per share on revenue of US$3.3bn. This topped the consensus earnings estimate for US$2.01 per share on revenue of US$3.1bn. Revenue grew 16.5% on a year-over-year basis.
State Street stock declined 5.4% to US$87.72 in premarket trade.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
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