Will add new alternatives capabilities and
strengthen fundamental equity and active fixed income teams, while
establishing State Street Global Advisors (SSGA) as a leader in
outsourced chief investment officer (OCIO) services
Total purchase price of up to $485 million –
transaction expected to be accretive to operating-basis EPS for the
first full 12–month period following the close of the
transaction
State Street Corporation (NYSE: STT), announced today that it
has agreed to acquire GE Asset Management (GEAM), a leading asset
manager, from GE (NYSE: GE). The transaction is expected to
increase SSGA’s assets under management by approximately $100
billion upon closing and add new alternatives capabilities, while
strengthening existing fundamental equity and active fixed income
teams.
“This transaction reflects our view of GEAM as a very high
quality organization with strong cultural alignment with SSGA. It
is also reflective of our desire to allocate capital to higher
growth and return businesses,” said Jay Hooley, chairman and chief
executive officer of State Street Corporation. “We believe this
will help accelerate our strategic plan to extend our capabilities
in key areas for our clients.”
Under the agreement, State Street will acquire GEAM in a cash
transaction with a total purchase price of up to $485 million,
subject to adjustments. Pending regulatory approvals and other
customary closing conditions, the transaction is expected to be
finalized early in the third quarter of 2016. State Street expects
the transaction to be accretive to operating-basis earnings per
share for the first full 12–month period following closing.
GEAM has more than $100 billion in assets under management for
more than 100 institutional clients, including corporate and public
retirement plan sponsors, foundations, endowments, sovereign wealth
funds and insurance companies. GEAM and its predecessor
organizations have been managing investments for GE’s US pension
and other benefit plans for over 80 years.
“As defined benefit plans – both private and public – undergo
change, GEAM’s skills coupled with SSGA’s existing capabilities
will position us well to provide effective solutions and outcomes
to these investors,” said Ron O’Hanley, president and chief
executive officer of SSGA. “GEAM will bring new alternatives
capabilities in direct private equity and real estate to SSGA while
enhancing our existing active fundamental equity, active fixed
income and hedge fund teams. In addition, GEAM’s OCIO and Insurance
platforms significantly strengthen our capabilities in these fast
growing areas.”
“State Street’s acquisition of GEAM will combine the proven
capabilities of two leading asset management firms with great track
records and complementary investment offerings, and create a unique
opportunity to expand these areas of our businesses together as we
leverage each other’s considerable investment experience and
expertise,” said Dmitri Stockton, chairman, president and chief
executive officer of GE Asset Management. “In addition, SSGA’s
significant experience managing retirement assets will ensure we
are well positioned to continue to deliver superior results in the
management of assets on behalf of GE benefit plan
participants.”
“GE benefit plan trusts have been servicing clients of State
Street for more than 25 years, and today’s announcement
demonstrates the strength of our relationship and the value we can
provide to our clients across both of our asset servicing and asset
management businesses,” O’Hanley added.
State Street Projected Transaction Financial Metrics:
- Excluding restructuring charges, the
transaction is expected to be accretive to operating-basis EPS for
the first full twelve–month period following the close of the
transaction.
- Targeted client asset retention rate:
greater than 90 percent.
- IRR expected to exceed our target 11%
hurdle rate, assuming achievement of planned synergies.
- In the first full twelve-month period
following the close of the transaction, fee revenue from the
transaction is expected to be approximately $270 million to $300
million.
- Total projected merger and integration
costs: $70-$80 million through 2018.
- It is estimated that the transaction
would result in a reduction of 40-50 bps to State Street
Corporation’s fully phased-in risk-based capital ratios under both
standardized and advanced approaches and of approximately 15-20 bps
to its fully phased-in tier 1 leverage and supplementary leverage
ratios.
- We anticipate issuing preferred shares
prior to the close of the transaction to offset the impact on our
leverage ratios and, with that issuance, do not expect the closing
of the transaction to have any material impact on our common stock
repurchase program.
About State Street Corporation:
State Street Corporation (NYSE: STT) is the world's leading
provider of financial services to institutional investors including
investment servicing, investment management and investment research
and trading. With $28 trillion in assets under custody and
administration and $2 trillion* in assets under management as of
December 31, 2015, State Street operates globally in more than
100 geographic markets and employs 32,356 worldwide. For more
information, visit State Street's website at
www.statestreet.com.
About State Street Global Advisors:
For nearly four decades, State Street Global Advisors has been
committed to helping our clients, and those who rely on them,
achieve financial security. We partner with many of the world’s
largest, most sophisticated investors and financial intermediaries
to help them reach their goals through a rigorous, research-driven
investment process spanning both indexing and active disciplines.
With trillions* in assets, our scale and global reach offer clients
access to markets, geographies and asset classes, and allow us to
deliver thoughtful insights and innovative solutions.
State Street Global Advisors is the investment management arm of
State Street Corporation.
*Assets under management were $2.24 trillion as of December 31,
2015. AUM reflects approx. $22.0 billion (as of December 31, 2015)
with respect to which State Street Global Markets, LLC (SSGM)
serves as marketing agent; SSGM and State Street Global Advisors
are affiliated.
About GE Asset Management:
GE Asset Management Incorporated (GEAM) is a global asset
manager with $110 billion in assets under management (as of
December 31, 2015). GEAM and its predecessor organizations have
been managing investments for GE’s U.S. pension and other benefit
plans for over 80 years. In 1988, the firm began offering
investment management products and services to investors outside
GE, and today manages portfolios for more than 100 institutional
clients—including corporate and public retirement plan sponsors,
foundations, endowments, sovereign wealth funds, insurance
companies, and GE affiliates. GEAM also manages portfolios for GE
employees and other individual investors through its mutual fund
platform. Investment offerings cover all major asset classes,
including U.S. and international equities, fixed income and
alternative assets. Assets are invested side-by-side with the
corresponding GE benefit plan portfolios and managed by the same
investment professionals, aligning GEAM’s interests with those of
its clients.
State Street Corporation’s Forward-Looking
Statements:
This news release contains forward-looking statements as defined
by United States securities laws, including statements relating to
our goals and expectations regarding our planned acquisition of
GEAM, including: benefits to, and effects on, our business,
capabilities and opportunities; our targets to transition, and
plans to integrate, GEAM, including the effects of synergies; and
the transaction’s effects on our results of operations, financial
condition and capital ratios. Forward-looking statements are often,
but not always, identified by such forward-looking terminology as
“outlook,” “expect,” “objective,” “intend,” “plan,” “forecast,”
“believe,” “anticipate,” “estimate,” “seek,” “may,” “will,”
“trend,” “target,” “strategy” and “goal,” or similar statements or
variations of such terms. These statements are not guarantees of
future performance, are inherently uncertain, are based on current
assumptions that are difficult to predict and involve a number of
risks and uncertainties. Therefore, actual outcomes and results may
differ materially from what is expressed in those statements, and
those statements should not be relied upon as representing our
expectations or beliefs as of any date subsequent to March 30,
2016.
Important factors that may affect future results and outcomes
include, but are not limited to:
- our ability to complete acquisitions,
joint ventures and divestitures, including the ability to obtain
regulatory approvals, the ability to arrange financing as required
and the ability to satisfy closing conditions;
- the risks that our acquired businesses
and joint ventures will not achieve their anticipated financial and
operational benefits or will not be integrated successfully, or
that the integration will take longer than anticipated, that
expected synergies will not be achieved or unexpected negative
synergies or liabilities will be experienced, that client and
deposit retention goals will not be met, that other regulatory or
operational challenges will be experienced, and that disruptions
from the transaction will harm our relationships with our clients,
our employees or regulators;
- the financial strength and continuing
viability of the counterparties with which we or our clients do
business and to which we have investment, credit or financial
exposure, including, for example, the direct and indirect effects
on counterparties of the sovereign-debt risks in the U.S., Europe
and other regions;
- increases in the volatility of, or
declines in the level of, our net interest revenue, changes in the
composition or valuation of the assets recorded in our consolidated
statement of condition (and our ability to measure the fair value
of investment securities) and the possibility that we may change
the manner in which we fund those assets;
- the liquidity of the U.S. and
international securities markets, particularly the markets for
fixed-income securities and inter-bank credits, and the liquidity
requirements of our clients;
- the level and volatility of interest
rates, the valuation of the U.S. dollar relative to other
currencies in which we record revenue or accrue expenses and the
performance and volatility of securities, credit, currency and
other markets in the U.S. and internationally;
- the credit quality, credit-agency
ratings and fair values of the securities in our investment
securities portfolio, a deterioration or downgrade of which could
lead to other-than-temporary impairment of the respective
securities and the recognition of an impairment loss in our
consolidated statement of income;
- our ability to attract deposits and
other low-cost, short-term funding, the relative portion of our
deposits that are determined to be operational under regulatory
guidelines and our ability to deploy deposits in a profitable
manner consistent with our liquidity requirements and risk
profile;
- the manner and timing with which the
Federal Reserve and other U.S. and foreign regulators implement
changes to the regulatory framework applicable to our operations,
including implementation of the Dodd-Frank Act, the Basel III final
rule and European legislation (such as the Alternative Investment
Fund Managers Directive and Undertakings for Collective Investment
in Transferable Securities Directives); among other consequences,
these regulatory changes impact the levels of regulatory capital we
must maintain, acceptable levels of credit exposure to third
parties, margin requirements applicable to derivatives, and
restrictions on banking and financial activities. In addition, our
regulatory posture and related expenses have been and will continue
to be affected by changes in regulatory expectations for global
systemically important financial institutions applicable to, among
other things, risk management, capital planning and compliance
programs, and changes in governmental enforcement approaches to
perceived failures to comply with regulatory or legal
obligations;
- adverse changes in the regulatory
ratios that we are required or will be required to meet, whether
arising under the Dodd-Frank Act or the Basel III final rule, or
due to changes in regulatory positions, practices or regulations in
jurisdictions in which we engage in banking activities, including
changes in internal or external data, formulae, models, assumptions
or other advanced systems used in the calculation of our capital
ratios that cause changes in those ratios as they are measured from
period to period; increasing requirements to obtain the prior
approval of the Federal Reserve or our other U.S. and non-U.S.
regulators for the use, allocation or distribution of our capital
or other specific capital actions or programs, including
acquisitions, dividends and stock purchases, without which our
growth plans, distributions to shareholders, share repurchase
programs or other capital initiatives may be restricted;
- changes in law or regulation, or the
enforcement of law or regulation, that may adversely affect our
business activities or those of our clients or our counterparties,
and the products or services that we sell, including additional or
increased taxes or assessments thereon, capital adequacy
requirements, margin requirements and changes that expose us to
risks related to the adequacy of our controls or compliance
programs; financial market disruptions or economic recession,
whether in the U.S., Europe, Asia or other regions;
- our ability to promote a strong culture
of risk management, operating controls, compliance oversight and
governance that meet our expectations and those of our clients and
our regulators;
- the results of, and costs associated
with, governmental or regulatory inquiries and investigations,
litigation and similar claims, disputes, or proceedings;
- the potential for losses arising from
our investments in sponsored investment funds;
- the possibility that our clients will
incur substantial losses in investment pools for which we act as
agent, and the possibility of significant reductions in the
liquidity or valuation of assets underlying those pools;
- our ability to anticipate and manage
the level and timing of redemptions and withdrawals from our
collateral pools and other collective investment products;
- the credit agency ratings of our debt
and depository obligations and investor and client perceptions of
our financial strength;
- adverse publicity, whether specific to
State Street or regarding other industry participants or
industry-wide factors, or other reputational harm; our ability to
control operational risks, data security breach risks and
outsourcing risks, our ability to protect our intellectual property
rights,
- the possibility of errors in the
quantitative models we use to manage our business and the
possibility that our controls will prove insufficient, fail or be
circumvented;
- our ability to expand our use of
technology to enhance the efficiency, accuracy and reliability of
our operations and our dependencies on information technology and
our ability to control related risks, including cyber-crime and
other threats to our information technology infrastructure and
systems and their effective operation both independently and with
external systems, and complexities and costs of protecting the
security of our systems and data;
- our ability to grow revenue, manage
expenses, attract and retain highly skilled people and raise the
capital necessary to achieve our business goals and comply with
regulatory requirements and expectations;
- changes or potential changes to the
competitive environment, including changes due to regulatory and
technological changes, the effects of industry consolidation and
perceptions of State Street as a suitable service provider or
counterparty;
- changes or potential changes in the
amount of compensation we receive from clients for our services,
and the mix of services provided by us that clients choose;
- our ability to recognize emerging needs
of our clients and to develop products that are responsive to such
trends and profitable to us, the performance of and demand for the
products and services we offer, and the potential for new products
and services to impose additional costs on us and expose us to
increased operational risk;
- changes in accounting standards and
practices; and
- changes in tax legislation and in the
interpretation of existing tax laws by U.S. and non-U.S. tax
authorities that affect the amount of taxes due.
Other important factors that could cause actual results to
differ materially from those indicated by any forward-looking
statements are set forth in our 2015 Annual Report on Form 10-K and
our subsequent SEC filings. We encourage investors to read these
filings, particularly the sections on risk factors, for additional
information with respect to any forward-looking statements and
prior to making any investment decision. The forward-looking
statements contained in this presentation speak only as of the date
hereof, March 30, 2016, and we do not undertake efforts to
revise those forward-looking statements to reflect events after
that date.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160330005548/en/
State Street Investor RelationsAnthony Ostler,
+1-617-664-3477orState Street CommunicationsCarolyn Cichon,
+1-617-664-8672orGE Asset Management CommunicationsChris Linehan,
+1-203-708-3193
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